Successful small business owners must master operations, sales, customer service, marketing, human resources and accounting. They must also maintain accurate accounting books in order to maximize tax liabilities.

A receipt-scanning program helps quickly document and track tax-deducible expenses including:

  • Travel expenses such as costs of plane tickets, taxis, lodging, meals and automobiles. Automobile costs can be tracked by multiplying mileage by the standard mileage rate or by claiming the business-related expenses for the vehicle. Standard mileage rates cannot be included on Forms 1065, 1120S and 1120. Mileage logs should include odometer readings, total miles driven, percent of mileage used for business, destination and purpose of the trip.
  • Expenses for advertising, promotions, interest on borrowed money and bank fees.
  • Legal and professional fees in the year incurred. If consultation relates to future years, the fees must be deducted over the life of the benefit.
  • Miscellaneous expenses such as bad debts (goods sold, not services), customer gifts, business-related books, postage, seminars and trade shows and business association dues.

If job descriptions, time sheets and W-2s are on file, unincorporated small family businesses employing their children can enjoy several tax benefits:

  • No Social Security or Medicare taxes are due. State unemployment and disability taxes are typically waived.
  • Child labor restrictions generally do not apply.
  • If children are paid less than the standard deduction, earned income is not taxed.
  • Owners can use their children’s earned income to open Roth IRAs. Earnings are non-taxable, and withdrawals for college-related expenses or a down payment for first-time homeowners can be made without penalty.

Tax software can be used throughout the year to help owners understand how financial decisions affect their tax situations. By organizing early, owners can maximize deductions and save time when it’s time to submit their tax returns. The goal should be to be thinking about these things all year long.  Then when it comes to tax time, you will not feel as much of a burden.