However, the money they are able to save in taxes by capturing all of their data will be much more valuable than the time and expense of entering the data
San Francisco (PRWEB) August 21, 2008
In a slow economy, it is even more important for small business owners, including home based businesses, to prepare to take advantage of available small business tax deductions. Congress has written many laws providing tax exceptions for small business owners that they are not using.
Most start up and small business owners work 7 days a week. When starting up or when the economy slows, they do all the work themselves since they often can't afford to hire employees. But spending this much time on their business does have significant advantages to small business taxes.
More "lifestyle" expenses are legitimately deductible as business expenses as a result of the 24/7 time the owner spends working" according to Elizabeth Shwiff. Shwiff is a Certified Public Accountant (CPA) and principal at Shwiff, Levy & Polo, LLP, a CPA and Management Consulting firm specializing in small business tax consulting and return preparation.
Tax rules and regulations change frequently and can be complex, says Shwiff. For example, in June the IRS increased the business mileage deduction by 16% effective July 1 to help offset the increase in the cost of gas. Usually the IRS changes the mileage deduction only at the end of the year.
Small business owners need to be able to take advantage of these changes says Shwiff. But she says there is a critical component to maximizing small business tax deductions.
"Small business owners must document all of their expenses or they will not be able to take advantage of these tax benefits. Documentation is the only way to ensure they can maximize all of the available deductions. The most effective method for keeping track of business related expenses is to record them in an accounting software program." says Shwiff.
"Lack of an organized documentation system is where many small business owners run into problems. They don't think they have time to enter their expenses or to learn an accounting program. Or they don't want to spend the money to have someone enter the data for them" according to Shwiff.
"However, the money they are able to save in taxes by capturing all of their data will be much more valuable than the time and expense of entering the data," states Shwiff.
Many business owners feel intimidated working with their financial information; since it's not their core business, it's easy to put aside and not manage the information effectively. However, Shwiff states that a small business owner can have their initial accounts set up and their initial data entered into a software program within a few hours.
There are many myths surrounding when small business owners need to begin keeping track of their financial transactions. For example, some assume they need to have a profit 3 out of 5 years for the IRS to consider them a business. According to Shwiff, this is incorrect. You need to begin your business related recordkeeping even before you open your business since you may eventually be able to deduct these expenses.
Shwiff says even though 2008 is more than half over, it's not too late to organize records in order to take advantage of available tax deductions.
"Keeping a record of business financial transactions is not optional says Shwiff. "The records a business keeps for the IRS are the same records a business needs to prepare their financial statements. So it's not duplicate work".
For assistance in setting up an accounting and recordkeeping system that meet tax requirements and the needs of the business owner, contact Elizabeth Shwiff at 415-291-8600.
About Shwiff, Levy & Polo, LLP
Shwiff, Levy & Polo, LLP was founded in 1989 and ranked as one of the top 100 Fastest Growing Companies in the Bay Area in 2007. As CPAs and Management Consultants, the firm is unique in how they work with clients to understand their business and assist them in gaining control of their financial life. Clients have direct access to the firm Partners who encourage questions. The firm is a Quickbooks Professional Advisor and can assist clients in setting up their recordkeeping as well as provide assistance with business planning, budgets, and bank credit lines.