Even though tax time is just weeks away, many local small business owners have yet to seek the help of a Boston, MA tax professional. Ann Irons, CPA, cautions that waiting too long to begin preparing your business taxes can have serious consequences for your company. Once panic sets in, you are more likely to make mistakes, cut corners, or leave out critical information. The result? Audits, late fees, and nasty penalties.

“I’ll just save my receipts instead of using a tax organizer.”

We hear this one often, and it’s painful each time. Can you cram all of your receipts into an expanding file? Yes. Should you? Absolutely not, says Ann. A receipt alone doesn’t provide much information about an expense, making it difficult to determine whether it can be safely deducted. Note where you were on what day, what you purchased, and why you purchased it. When you file your taxes, the Internal Revenue Service scrutinizes some expenses, such as entertainment and travel, more closely than others. A single receipt may not provide sufficient information. If you don’t think you have time to maintain this level of detail, you might be right—yet another excellent reason to use an accounting professional in Boston, MA.

“I’m the owner of the business, and I’ll pay myself as much as I want.”

Small business owners are a hard-working bunch. If you’re incorporated, however, the IRS has strict requirements for substantial pay increases. For example, suppose you’ve paid yourself $75,000 yearly for the previous five years. This year, you decide, you’ll pay yourself $180,000. Unless you can provide clear justification for such a dramatic increase, the IRS may deem it unreasonable compensation. If this happens, the money will be taxed at the corporate level, then distributed as dividends.  Those dividends? You’ll pay taxes on those, too.

“There’s no way this expense is deductible.”

Small business owners express shock and disbelief when they discover which items they can and cannot rightfully deduct. The key here is to document each expense in your tax organizer, taking care to include the receipt and important details. For example, you may be able to deduct dry cleaning expenses for suits worn at overnight business conferences, or business dinners with prospective customers. When you work with Ann, you can take advantage of those sneaky deductions earned during the course of business.

To learn more about our small business tax and financial services, contact Ann at 508-966-0700 for a consultation. Follow us on Facebook for the latest tips on taxes, small business management, and finance.