With every year that passes, prepping your business taxes and trying to hold on to as much of your hard-earned money as is legitimately possible, becomes increasingly challenging. This challenge is compounded for those who choose not to work with an expert tax specialist.
Complex tax laws, changing regulations, and misinformation, have turned tax planning into a veritable minefield for the average business owner, which is why so many turn to experts in tax planning in Coral Springs. Their professional guidance helps owners of businesses in a wide range of industries and sectors hold on to more of the money they’ve worked so hard to make, by not falling prey to the following common business tax misconceptions:
All costs associated with a startup are deductible immediately
Often referred to as capital expenditures, typical business costs for startups include such things as travel, advertizing, training and research; but any expenses incurred prior to the business becoming operational, are not deductible.
If you overpay the IRS, you won’t be targeted for an audit
Whether you pay your taxes in full or overpay your taxes is irrelevant to the IRS, their only concern is you paying less than you owe, and/or having listed deductions that can’t be substantiated. Ultimately, it’s never a good idea to overpay the IRS; the best way to avoid an audit is to document your expenses properly and seek the right advice and guidance from a tax professional.
If you’re incorporated, you’ll be entitled to more deductions
Sole proprietors and S Corps actually qualify for a lot of the same deductions as businesses that are incorporated, and for a lot of smaller businesses, being incorporated brings with it unnecessary costs and burden. Setting your startup up as a corporation can cost thousands in legal and accounting fees, and if you don’t make any money in the first few years, you could end up with no income, but still having to pay minimum payments for corporate tax.
The home office deduction makes you a target for an audit
While it’s true that this used to be a red flag for the IRS, this is no longer the case, provided you keep up-to-date and accurate records that are in line with the requirements of the IRS. Do note that an unusually high deduction-to-income ration might pique their interest however, and trigger an audit.
If you don’t take the Home Office deduction, your business expenses aren’t deductible
Even if you run your business from home but choose not to take the home office deduction, you can still take deductions for such things as travel expenses, printing, phone calls related to the business, equipment depreciation, employee or contractor wages etc.
Seeking a filing extension is an extension on paying your taxes
No. Requesting an extension is only for your filing date. When your taxes are due and you don’t pay, penalties and interest start, and continue mounting until you pay. If you’re worried about filing late, hiring an accounting firm in Fort Lauderdale could help keep you on track and avoid costly fines.
Owners of a part-time business can’t set up a self-employed pension plan
If you are employed in a salaried position and have a 401(k) plan at the same time as setting up a company of your own, you’re still entitled to set up a SEP-IRA for your new business, and take the subsequent deduction.
Whatever size business you’re running, it pays to have – at the very least – a basic understanding of your tax commitments, and how the system works as a whole. For more detailed tax planning and strategic deductions and credits, you can always work with an experienced accountant.
