The end of the year will be here soon and with it the end of the 2019 tax year. Although taxes are not due until April 2020, as a small business owner, you may be preparing your files and documents even now. You may also be wondering what to expect. There are several myths about the tax return process, which can make your tax return intimidating. Read on for our guide to these small business tax return myths and the truth behind each one.
Home Office Deductions Are Red Flags
It has long been a small business tax return myth that home office tax deductions will raise a flag and trigger an IRS audit. This may have been true long before the omnipresence of computers made working from home extremely feasible. Now, the commonality of businesses run from home have significantly reduced IRS suspicions about these deductions. However, it may be a red flag if you claim a huge amount of space or your entire home as your office.
You Can Immediately Deduct All Startup Costs
Ordinary startup expenses include rent, equipment, and licenses, but there are always hidden expenses in starting a business. There is a misconception that you can deduct every expense right away, but that is unfortunately not true. In actuality, the IRS limits the startup costs you can claim on your small business tax return.
Tax Extensions Mean You Can Push Back Tax Payments
A small business tax return myth that is too good to be true is that getting a tax extension means you can also extend your deadline to pay your taxes. Unfortunately, while the IRS permits tax extensions on the day you file taxes, they do not offer extensions on the day you pay them.
A Big Tax Refund is Always a Relief
Sometimes receiving a large refund check in the mail feels like a great reward for all of your hard work. However, a large tax refund could be a sign that you are not estimating your taxes correctly. By overpaying taxes, you are sending extra money to the government all year that you could have been putting toward your business. You should meet with a tax consultant to refine your income tax accounting.
Remember The Basics
You will likely not encounter the issues involved in these small business tax return myths. What you need to remember for your tax return is to get your taxes filed correctly and on time. Start early and organize your financial statement, accurately fill out tax forms, and make on-time payments. Talk to a tax professional at Harding Group today to assist you with your small business tax return. Your accountant can help maximize your return if you keep detailed financial records of your business.
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