Small Businesses Need To Know Tax Law Basics
… let’s grab a fistful of paper dollars. Think about stuffing them down a storm drain. Small businesses unwittingly throw money away — well, no. They actually send it to the government.
Droves of small-business owners overpay taxes because they don’t know the rules, they don’t take time to learn, they are too busy running the business, they have paperwork chaos.
Business offices need to identify transactions so the tax preparer has a fighting chance to get it right. I’ve seen the brown paper bag of receipts come to a CPA office. Hundreds of dollars worth of restaurant receipts for, well, who knows, crumpled in the bag.
To be deductible, slips need some identifiers. I’ve been taught to write the names of the people who ate, plus the business topics that were discussed on the receipts for those meals. And those receipts also need to show the date and the place where the meal took place.
Properly notated, all or most of those receipts in that crumped bag might have been deductible at tax time. But I was instructed to ignore them. They wouldn’t have passed an audit. Generally, only 50 percent of meal expense is deductible. You need to “stay tuned” to the tax laws and the information the preparer will need. Standard meal allowance may be used when traveling. Higher percentages are allowed for “hours of service,” defined by the federal Department of Transportation.
Where else is Ms. or Mr. Small Business throwing money away? The Internal Revenue Service allows 100 percent deduction for holiday parties, summer picnics for employees and employee/stockholder/director meetings. Also, entertainment and meals made available to the general public are 100 percent deductible. Read full article.
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