Christopher Hanley: Small businesses represent over 99% of all employers in the United States and are as varied and unique as the entrepreneur who drives them. There are twenty five million small firms in the United States according to a 2007 estimate with one thing in common; they are subject to federal taxes.
Monica Baker: There’s no minimum amount of income. Someone was making before they need to include it on their tax return. Small businesses range from people making a few hundred dollars through online auction fights to corporations that make millions.
Christopher Hanley: Owning a small business can be taxing enough without involving the Internal Revenue Service, so we asked the Internal Revenue Services, Director of Examination for the Small Business Self- Employed Division for some tips.
Monica Baker: I would recommend hiring a reputable tax professional. 80% of small businesses use they pay tax prepare. And it’s their job to keep up with the latest tax rules providing you more time to run your own business. You’ll have your hands full with that.
Christopher Hanley: Tax time will be easier and your professional will take a smaller bite out of your budget if you have good records. Make sure you have receipts for expenses and deductions.
Monica Baker: Don’t claim expenses unless you have records to prove them. And that they’re related to your business. Again, don’t combine them with personal records.
Christopher Hanley: Small businesses owners want to keep those tax records and documents organized and accessible for at least seven years. The IRS has up to three years to audit your return and six years to come after you if they think you have under estimated your income by at least 25%. There are some other guidelines to consider about small business tax records.
File electronically when possible. Electronic filing put your return right in to the IRS system without any eyes looking at it and minimizes lower level screen of your business return. Filing electronically also makes it easier for the IRS to track your information. Electronic filing also minimizes handwriting errors and illegible returns.
Keep original receipts, checks or insurance documents with your returns. If your tax return is tagged for additional scrutiny, having the documentation attached could eliminate the need for a larger audit. Beware of promises of dramatic tax savings.
Monica Baker: Don’t fall for scams that claim to avoid paying taxes. If it sounds too good to be true, it probably is.
Christopher Hanley: Baker recommends entrepreneurs read the free guide, starting a business and keeping records, IRS publication 583 for small business owners. It is free and can be found online at www.IRS.gov. I’m Christopher Hanley for SBTV.com. Small business is our only business.
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