Accounting is an important aspect of any business, regardless of the size of the business. Keeping your accounting in proper order should be a top priority. If you are like most business owners, you probably have trouble maintaining the accounts and tax paperwork yourself. If this is the case, then you need an accountant to handle the accounting aspects of your business. This will free up your time to perform other tasks to help your business run efficiently. Last-minute problems, especially during tax season can be stressful and frustrating. You may find at tax time that some of your account balances are incorrect. This happens a lot with small businesses. A professional that specialises in small business accounting can correct these mistakes and prevent them in the future.
Most new entrepreneurs are unaware of how important accounting is to their business, and they end up with some major errors, due to poor record-keeping or incorrect accounting methods. Many business owners are simply unorganised, making it impossible to accurately track business finances. Some just do not have the time to keep track of financial records. The solution to these problems is to hire an accounting firm that specialises in small business accounting services.
When choosing a firm, examine its credentials, and explore its services to help you decide if the firm is right for your business. Don't hire the first firm you come across. What is suitable for one business may not be suitable for another. Consult with the accountant about your specific needs. Once you've hired a firm, you can hand over your accounting to him, and you no longer have to worry. However, keep track of the work that is being done, and check from time to time to make sure your business accounts are being properly maintained. Share all your questions and concerns with the accountant.
Some businesses hire accountants on a long-term basis to keep the company financials in order year-round. In many cases, it is more efficient and affordable to hire a bookkeeper to handle day-to-day financial operations. Other businesses only use accountants yearly to prepare tax returns. Bookkeepers cannot legally prepare tax returns for a business. You may want to prepare your taxes yourself, but hiring an accountant to file tax returns is a wise choice because these tax professionals know how to maximise the number of tax deductions for their clients and how to organise financial documents such as receipts.
The main reason for hiring an accountant is that it is the easiest way to have your financial records put in order and your tax returns completed. Most accountants guarantee their work and complete it in a timely manner, so there's really no reason to not hire one. Instead of spending hours sorting through your company finances, pick up your phone and schedule an appointment with a local accounting firm. Remember, time equals money, and you may find that the hours you save by hiring an accountant is well worth the cost.
Are you a small business owner who's frustrated about taxes? You face a mind-boggling array of choices when it comes to figuring out what is and is not deductible on your income tax return each year. And just when you think you've got this tax system figured out, new laws are passed and it feels like you've got to start all over.
Perhaps the best place to begin this journey is the income tax return itself. Depending on what type of entity you own, here are the main income tax forms: Schedule C (sole proprietorship), Form 1065 (partnership), Form 1120 (C corporation), and Form 1120S (S Corporation). Note: If you own a limited liability company (LLC), you'll use one of those four forms, depending on how you choose to be treated for tax purposes. These tax forms are an excellent way to begin the process of answering the question: What's deductible?
Notice that on each of these forms, there may only be 15 or 20 specific expense categories, or line items, to help you know what to deduct. For example, on Schedule C, starting with line 8, you have advertising, car and truck expenses, commissions and fees, depreciation and section 179 expense, and so forth.
This list continues to line 26, wages. And that's it. Only 19 expense categories. Are those the only 19 deductions you can take for your sole proprietorship?
Or how about Form 1120S. The expense section starts with line 7, compensation of officers, and continues on to line 18, employee benefit programs. And again, that's it. Only 12 expense categories. Obviously there must be more than 12 deductions you can write off for your S corporation.
So if you're thinking, "These tax forms give me only a handful of deductions to identify, but fall short of providing a comprehensive list", you are correct. So what do you do now?
All the above-listed business income tax returns include a line called "Other expenses" or "Other deductions". On Schedule C, it's line 27. On Form 1120S, it's line 19. On Form 1120, it's line 26. And on Form 1065, it's line 20. This is where you get to report all the other deductions that are not specifically mentioned on the previous lines. You simply attach a separate statement that itemizes the remaining business deductions. Then add up all those other deductions and transfer the total from the attached list to the main part of the tax return.
This "other deductions" list can be as long as you need it to be. There are dozens (even hundreds) of legitimate deductions for your business that the IRS didn't think necessary to include on the main page of the tax return. And now it's up to you to find out what they are.
There are plenty of good resources to help you compile that list of bona fide deductions. The IRS website has many free publications that explain deductions, depending on your entity: Publication 334 (sole proprietorship), Publication 542 (C corporation), Publication 541 (partnership). For S corporations, there is no separate publication, so start with the Form 1120S instructions.
Admittedly, IRS publications are not known for readability or comprehensiveness. So if you are serious about finding out what you can deduct, do yourself a favor and spend $15 or $20 on a few well-written books about small business tax deductions. Here are three of my favorites: "422 Tax Deductions for Businesses & Self-Employed Individuals" by Bernard B. Kamoroff, "Small Business Taxes Made Easy: Increase Your Deductions, Reduce What You Owe, and Boost Your Profits" by Eva Rosenberg, and "Lower Your Taxes Big Time" by Sandy Botkin.
Both Edward Singleton & Wayne M Davies are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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Wayne M Davies has sinced written about articles on various topics from . Looking for more small business tax tips? For a free copy of the 25-page Special Report "How To Instantly Double Your Deductions", visit