Posted by Keith Hall (NASE Tax Expert) -
There are many places on a small-business owner’s tax return that mistakes can be made. Miscalculations, code section misinterpretations, eligibility oversights, and even the most simple of math mistakes can cause headaches, stomach aches, and even lead to an IRS inquiry. But which mistake is the most devastating? Which mistake do I hate to see more than any other?
I hate the mistake that never even makes it to the tax return because the small-business owner forgot to include it, and that is a missed deduction. Any deduction that is eligible, allowable, and even encouraged, yet for whatever reason was omitted from the return means that a small-business owner is giving more money than is owed to the IRS.
I can hear you on the other side of the screen saying, “No! No! Say it isn't so!” But it’s true! Literally millions of dollars in taxes are paid to the IRS every year when maybe that money could have been better used for creating another job or even just kept in a savings account.
Most business deductions show up in the business checkbook, but there are other deductions that can hide from us. The business use of your vehicle is commonly overlooked yet can means hundreds of dollars or more in tax savings. If you use your vehicle for business, as most of us do, there is a deduction for that. If you operate your business out of your home, as so many of us do, there is a deduction for that, too. A part of your mortgage interest, real estate taxes, and even your utilities can be used to reduce the amount you send to Uncle Sam. And don’t forget about investing in your own future. The IRS won’t remind you that making a retirement contribution to an individual retirement account (IRA) or a Simplified Employee Pension (SEP) plan will not only help your future, but it will reduce that amount of your tax bill.
So before you send in all of those forms to the IRS, stop and make sure that you have included everything. Not just the forms, but make sure you have included every deduction for which you are eligible. You work hard for every dollar that is sitting in your checking account. Don’t make the biggest tax return mistake of them all, which is sending more of that money to the IRS than you absolutely have to.