4 Business Tax Deduction Mistakes to Avoid

While there are a number of business tax deduction opportunities, it is important that you take time to determine whether you qualify for them. In the past, there have been many tax deductions that were either filed incorrectly or by individuals that weren’t even eligible. If you need advice on filing for your business deductions, here is a guide of mistakes to avoid.

Mistake 1 - Not Keeping Proper Documentation

Failing to keep proper documentation is one of the most common mistakes that is made when it comes to business tax deductions. It is extremely important to keep logs, receipts, invoices and any other paperwork to prove each deduction that you make. While you may find it tedious, you will actually receive a higher return by documenting meticulously and you will able to remember to claim everything that you paid for in the first place. On the back of receipts for business dinners be sure to detail who was present as well as what business was discussed in case any questions come up later on.

Mistake 2 - Not Taking Advantage of Deductions

One big mistake is not taking advantage of all of the deductions out there. You can be saving a lot of money if you take the time to look into what deductions are appropriate for the business you have. Subscriptions to business magazines, computers, insurance and even child care may be deductible. Take time to research to save possibly hundreds of dollars more.

Mistake 3 - Not Determining Eligibility for Deductions

While it is true that you want to deduct everything you possibly can to maximize your tax return, some things just do not qualify. It is very important to determine if the deductions you are trying to make are legal. For example, if you have Internet or a phone line in your home business but also use it for personal calls or use, you cannot deduct the entire amount that you pay each month for these expenses. You must first determine the percentage of time you spend doing business on the phone or on-line and then deduct only that amount. Failing to do so will result in penalties if you are audited. Another example of this is the business car. First, you cannot deduct the amount of mileage just to and from work each day. Second, when counting mileage to deduct, you can only apply the miles that pertain to business-related trips. Driving your children to school in the morning doesn’t count even if it is in the ‘company car’.

Mistake 4 - Miscalculations

When you own a business, there are a lot of deductions that you will be able to take. You will be dealing with a lot more money as well as more calculations than you do with your personal income taxes. It may be wise to have the help of a professional to ensure that you have every calculation correct. While it may just be an honest mistake that you made on your own, it could lead you into a whole slew of problems if caught. Even if you plan on filing yourself, having someone look over the final product can save you from an audit.

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