Own It Community Strategist and Host Georgia Ritz spoke with CPA Jeff Godwin who highlighted some of the most common mistakes that can cost you at tax time. You can find the full article "Are You Making One of These Common Tax Mistakes?" at the following link. https://www.ownit.com/communities/ownit/posts/698303

1. Avoid These Six
Common Tax Mistakes
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2. Are You Making One of These Common Tax
Mistakes?
Own It Community Strategist and Host Georgia
Ritz spoke with CPA Jeff Godwin who
highlighted some of the most common mistakes
that can cost you at tax time.

3. #1: Deducting Startup Costs Too Early

4. Startup Costs
Startup costs are actually exactly what they sound like.
When you start a new business, you're going to run out
and buy a bunch of stuff. You'll rent an office and get a
desk or a computer or a printer. Or, maybe you paid an
attorney for legal advice or documents.
These are all considered your startup costs and they're
expenses that cannot be deducted until you have your first
dollar of revenue. More simply put – until your first sale.

5. #2: Not Taking Advantage of a
Medical Reimbursement Plan

6. Medical Reimbursement
Most folks aren’t familiar with what’s called the Medical Expense
Reimbursement Plan, or MERP. The reality is that many people think medical
expenses are only deductible if you itemize them on Schedule A and if those
deductions exceed 10% of your Adjusted Gross Income.
Medical expenses in general (meaning trips to doctors, dentists, eye care
specialists, hospitals, etc) can actually be quite difficult for people to deduct.
But MERP is when tax-free money can be paid out by an employer to an
employee, only to be used for medical expenses.
If you handle it strategically, you can make your spouse an employee of your
company. Then, all of the sudden your family medical expenses can be
deducted before taxes.

7. #3: Mixing Business and Pleasure

8. Business Versus Personal Expenses
This one trips up a ton of people. It starts to go wrong when people
commingle their personal expenses with business expenses, which means the
end of the year becomes a real mess. Whether you’re preparing taxes yourself
or working with an accountant, this becomes a major headache.
Here's an example of a sticky situation: receipts that show both groceries and
office expenses, or receipts where fuel for your work vehicle and personal
purchases are combined. It's (almost) impossible to separate all of those.
The best way to avoid this is to have a separate checking account for business
and a separate account for personal. Also, keep in mind that a separate credit
card only used for business can help you stay organized to make your tax
return easier to follow, and save you money.

9. #4: Choosing the Wrong Business
Structure

10. Business Structure
As a small business owner or self-employed professional, there's a high
likelihood that establishing as a sole-proprietor is the right option. There
are pros and cons of selecting each type of business entity, but a lot of
self-employed folks will fall under this category.
Regardless of whether you choose to conduct business as a sole-
proprietor, an S-Corp, a partnership or an LLC, a lot of thought needs to
go into that decision. As your business grows, you may consider
changing your entity to reflect your growing needs.
The real mistake people make is in not looking at all the options
available from the very start.

11. #5: Paying Late

12. Paying Late
Most entrepreneurs are so busy running their businesses and
pouring their energy into working hard that they often delay the
inevitable, which is paying taxes.
There can be serious penalties for underpaying or paying late. The
government can garnish wages, levy checking accounts and can
even shut down your business.
Easy ways to avoid major penalties include keeping close
attention to your bookkeeping, staying organized financially and
staying on top of paying your quarterly estimated tax payments.

13. #6: Missing Home Office Deductions

14. Home Office Deductions
The IRS has made it clear that if you’re going to take a
deduction for a home office, it needs to be your primary
workplace. This means it should be an area that’s
exclusive for *just* business.
This space needs to be a separate room, somewhere out
in the back of your house, or a space that’s clearly
separated from the purposes of the other rooms. The kind
of place you’d see clients or do work and nothing else.

15. Home Office Deductions
There are two main methods you can use to determine
your deduction. With one, calculate what percent of your
entire home’s square footage is used for your “office
space” area and use that percentage to deduct expenses
(like mortgage interest, depreciation, utilities and repairs).
Or, use the simplified home office method. With this,
you’re allotted $5 per square foot (of the space used for
your home office) as a deduction.

16. FIND MORE INFORMATION on OWN IT
• Visit OWNIT.com for the full post on common
tax mistakes including additional information
and links.
• Check out the rest of our helpful series.
• Join the Network Dedicated to Small
Business Success.
• Connect with thousands of small business
owners like you with our free app.

17. https://www.ownit.com/communities/ownit/posts/698303
Get more information for your small business on OWN IT.

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