Most business owners and entrepreneurs don’t like thinking about taxes. Deductibles and audits would be stressful for anyone, especially an individual with a company on the line. Our San Diego tax attorney at Milikowsky Tax Law offers tax return reviews for small business owners to help ensure they are getting the return they deserve and are protected from IRS audits.
We understand that mistakes can happen, which is why we can help prevent you and your business from slipping into real trouble. Our firm has compiled a list of ways we have seen business owners make real mistakes on their taxes. Knowing what to look for can help you make smarter decisions in the future!
Common misconceptions that can lead to mistakes:
- You don’t need any help on your taxes: Business owners don’t always have the knowledge they need to correctly fill out tax forms, but instead of paying for a professional to oversee the process many would rather cut costs with programs like TurboTax. The problem with this is that if you do get into trouble with the IRS for your taxes, TurboTax won’t represent you.
- If you keep receipts, you don’t have to keep a tax log: A tax organizer or diary is well worth the effort of logging and upkeep. Keeping an accurate and up to date log of expenses, travel, deductibles, and other records will not only make the tax process a breeze, but will also create a bulletproof source on the chance of an audit from the IRS.
- Getting a big refund is a good thing: Yes, everyone loves seeing a big number on their return from the IRS, but in reality the situation is a bit more bittersweet. A big refund check means that you have been giving the government interest-free money over a long period of time. Accurately adjusting your withholding will ensure that you pay the government a more appropriate amount throughout the year.
- Your salary is completely adjustable: That isn’t always the case. If you dramatically increase your pay check without substantiate a reason, the IRS can disallow the increase and claim it as unreasonable compensation. So you should think twice before you increase that pay check from $100,000 to $500,000 after a really profitable year.
- My hobby is my business: If your Etsy “business” is consistently losing money (because making handmade bottle openers with the Presidents’ faces on it isn’t cheap and only purchased by a very niche market), the IRS may decide you actually don’t have a business on your hands. If your business is categorized as a hobby instead, you won’t be entitled to the same deductions.
If you need a San Diego tax lawyer to help review your tax return, contact our office today by calling (844) 444-2889.