The only secret for small business taxes

Telling a secretYou’ve probably seen the articles: “4 secrets for small business taxes,” or “17 things you should be deducting for your business,” and so on.

The secret? Rarely will everything in these articles apply to your business, and sometimes nothing at all. It’s like when you see drug commercials; you can’t assume that the drug cures an ailment you have, even if the symptoms are similar. Self-diagnosing is not only problematic in the medical world, but with bookkeeping for your business as well.

I’ll be the first to point out that I’m an accountant and bookkeeper, not a professional tax consultant. Having said that, bookkeeping still requires recording transactions with tax implications in mind.

Most transactions are straightforward; they are for a sale, or a purchase of inventory, or to pay the rent. But some could be a question of expensing versus capitalizing a piece of equipment. For my clients, I keep a running list of questions that should be asked of their CPA at tax preparation time, because tax codes change, or the CPA may suggest handing transactions in alternate ways for a tax advantage. Keeping such a list, and forwarding it with the financials, will aid the CPA in understanding the financials they are given, and notify the CPA of potentially necessary adjustments.

One tip that always crops up in those articles that I do agree with is the importance of keeping receipts. Especially if you are planning on starting a business soon, you’ll need to know the date and price of business-related expenses.

Does this mean you need to keep every receipt forever? Not necessarily, but if you purchase a new home computer and start a business from home two years later, wouldn’t you want your CPA to have the ability to consider that computer as an expense?

For the most part, though, you should take these articles with a grain of salt. And read the fine print! Just because an article says something “can” qualify you, that doesn’t mean it will, or that “qualifying” will mean what you think it might. Client gifts, for example-it’s true that they are deductible, but only up to $25.00 per client.

There’s a lot of potentially misleading information out there about small business taxes. By all means, use those articles as a way to generate questions for your bookkeeper and your CPA. But make sure that the people you trust with your financial information know what will apply, or not, specifically to your business. That’s the real secret.

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