It’s getting to be that time of year when individuals and businesses alike begin preparations to file their taxes. Year over year, we see filers stymied with pitfalls that are easily avoidable. Minimize your pain this season by avoiding these three common problems:
If You Don’t Have a Record of It, Don’t Try to Claim It
Maybe you legitimately paid for a new business computer but cannot find the receipt. Of course, there is a trail somewhere. If you’re missing the original receipt, you can often go back to the card you used to purchase the item or the store where it was purchased for copies of bills of sale… don’t attempt to claim the personal laptop you bought for your kid for college. We both know that’s not a business expense. Guess what? The IRS will figure that out, too. Make several little ‘they’ll never notice’ claims and you could expose yourself to costly penalties. Other murky areas that can raise red flags include claiming utility costs for a home office (be sure you’re doing it correctly), untraceable income to family members, lavish gifts and other expenses outsized for the level of income generated by a business. Be honest. Be real. Be on the right side of an audit.
I’ll Do It Tomorrow
The worst time to get started on your taxes is ‘later.’ I don’t care what you told yourself in school about working better under pressure when you waited until the last possible second to write a paper or study for a test, taxes are not meant for cramming. When you wait until the 11th hour, you risk not having everything you need or not having enough time to pull all the receipts and figures together accurately. Here’s another shocking fact: you can actually collate your receipts and record them (manually or automatically with software) throughout the year! Yes, instead of scrambling to organize paperwork the second week of April, you can enter receipts periodically to avoid fighting the shoebox full of crumpled papers all at once. Bonus: you increase your chances of maximizing your deductions when you have time to consider all possible deductions thoughtfully.
Know What You Owe
Ever hear the expression: ignorance is not a defense? Know the full amount of taxes you’re responsible for. Many taxpayers find themselves in a bind by not being aware of their financial responsibilities. It’s better to go through everything honestly and find out the full extent of your obligations. If you come up shy, we can work out a plan to sort things out with the IRS. Being blissfully unaware does not exempt you and avoiding it will only make things worse. Likewise, as we mentioned in other blogs, if you receive a letter from the IRS, do not ignore it! We cannot stress this enough. Avoiding whatever is in the correspondence, won’t make it go away. It will sit there and accrue mad fees.
The good news is we’re still early in the year. You have enough time now to deal with the shoebox under your desk, find lost receipts and get yourself organized. You also have time to ask questions about what is allowable and the best way to attack your unique tax situations. That’s where we can help. Contact our office at 724-216-5180 or use our online form.