NEW YORK (AP) - Some of the biggest problems small business owners have during income tax filing season are the result of mistakes and oversights they made during the previous year.
Sloppy record-keeping is a big reason why owners struggle at tax time. Another problem is that owners often short-change themselves by not being sure they're taking all the deductions they're entitled to. That also can be the result of haphazard records, but it also may come from not knowing some tax law basics.
Keep track of spending
A common problem for business owners who use vehicles or homes for both business and personal reasons is they forget to keep track of what they spend for each. For example, Jeffrey Berdahl, a certified public accountant with RLB Accountants in Allentown, Pa., said, an owner who gasses up his car may forget to reimburse himself for the portion of the purchase that should go toward personal use. The reverse can happen: An owner doesn't think to take a tax deduction for the portion that should go toward the business.
Owners who use their cars partly for the business, or who have a home office, should go over all the expenses from the previous year and be sure they don't miss any chances for deductions. With a vehicle, insurance, gas, repairs and garage rental can all be deductible. An owner needs to determine the percentage that the vehicle was used for business and then multiply that by the expenses. It's also possible to use the IRS' mileage allowance to figure a deduction.
With a house or apartment, there are similar rules for computing a deduction. In this case, square footage is used. Repairs, mortgage interest or rent, insurance, utilities and maintenance costs all can be deducted.
For more information, an owner should look at IRS Publication 587, Business Use of Your Home, or Publication 463, Travel, Entertainment, Gift and Car Expenses. You can find them on the IRS website, www.irs.gov.