It’s that time of the year, and small business owners everywhere are frantically putting records together and digging up receipts. Even though many of you hire tax accountants, this process is still a hassle. Here are 3 items to consider during this time of the year and possibly think about implementing in advance for next year:
Record Keeping Matters
Incomplete records are the biggest problem accountants and bookkeepers see at small businesses. Rather than using an accounting software program or a bookkeeper year-round, receipts and bank statements are stuffed in envelopes and then the question still remains “is everything really here?” Using accounting software and a bookkeeper to keep track of revenue and expenses regularly will help guard against costly errors.
Small businesses that hire freelancers need to make sure that these workers are truly independent contractors and not employees. Using an independent contractor saves you from payroll expenses such as Social Security, Medicare, and benefits. But independent contractors cannot be treated like employees. For more on this, see ourpost on paying employees.
Your Home Office
The deduction for using part of your home as an office brings some discussion. If you’re using the kitchen table as your office the government will not allow a home office deduction. A home office must be a separate space used exclusively for business purposes. And as far as the car goes, you can use that for personal and business as long as you keep a separate log of the business miles driven.