Many small business owners hear the phrase “clean books,” especially when talking about bookkeeping or preparing for taxes. While the term is used often, it is not always clearly defined. Clean books are not just about having records in place — they reflect how accurate, organized, and up to date your financial information is. What … Read more
Part of the series: 10 Small Business Tax Mistakes (Based on IRS Guidance) How business owners pay themselves depends on the business’s legal structure. Different entity types have different rules for compensation and tax reporting. IRS guidance explains that sole proprietors, partners, and S corporation owners follow different rules when paying themselves from the business. … Read more
Part of the series: 10 Small Business Tax Mistakes (Based on IRS Guidance) Some business expenses involve both personal and business use. When this occurs, only the business portion of the expense may qualify as a deduction. IRS Publication 463 and IRS Publication 587 explain that certain expenses must be allocated between personal and business … Read more
Many small business owners review their financial reports but are not always sure what to look for. Seeing the numbers is one step. Understanding what stands out within those numbers is what makes them useful. Changes Over Time One of the most important things to look for is change. This may include: Looking at how … Read more
Part of the series: 10 Small Business Tax Mistakes (Based on IRS Guidance) Business property used in operations may need to be depreciated over time rather than deducted all at once. IRS Publication 946 explains the rules for depreciating business property, including equipment, vehicles, and other assets used in the business. Depreciation allows businesses to … Read more
Part of the series: 10 Small Business Tax Mistakes (Based on IRS Guidance) Proper documentation is an important part of maintaining accurate business records. IRS Publication 583 and IRS Publication 463 explain that taxpayers must keep records that support the income and expenses reported on a tax return. Certain expenses, such as travel, meals, and … Read more
Part of the series: 10 Small Business Tax Mistakes (Based on IRS Guidance) Some tax provisions allow business owners to defer or reduce taxable income through qualified accounts. IRS Publication 560 and IRS Publication 969 explain the rules for retirement plans and Health Savings Accounts (HSAs). These accounts allow eligible individuals to make tax-advantaged contributions … Read more
Part of the series: 10 Small Business Tax Mistakes (Based on IRS Guidance) Worker classification is an important part of complying with federal tax rules. IRS Publication 15-A explains that businesses must determine whether workers are employees or independent contractors based on common law rules. This determination affects how wages are reported and whether employment … Read more
Financial reports, such as profit and loss statements and balance sheets, are often used to understand how a business is performing. While these reports provide important information, they do not always show the full picture on their own. Looking at reports without additional context can sometimes lead to confusion or incomplete conclusions. What Financial Reports … Read more
Part of the series: 10 Small Business Tax Mistakes (Based on IRS Guidance) Business expenses can reduce taxable income, but spending money solely to reduce taxes does not automatically improve a business’s financial position. IRS Publication 535 explains that ordinary and necessary business expenses may be deductible when they are directly related to operating the … Read more