If you are a small business owner you have probably thought about cutting some costs and completing your own business taxes in RI. You may also have thought about the option of buying some type of business software package to handle your tax preparation. However, while both are possible options, they are also the greatest source of the most common mistakes that are found on business taxes in RI.
Failure to Report all Income
Businesses, just like individuals, are required to report all of their income. This includes rental income, side jobs completed under the business name or even projects that were completed that were small. Failing to report all the income can result in up to a 20% penalty on your business taxes in RI.
Taking Deductions
Business owners completing their own business taxes in RI rather than using a professional accountant may be taking deductions on the business that are not allowable. This is common for entertainment and even materials, especially when items are not solely for business use and may be partially used for personal reasons.
Mileage and Travel
Keeping accurate logs and records of your business travel is critical. You cannot take a trip for pleasure and claim it for business. In addition you cannot claim business travel unless you have records to prove that business was conducted on the trip.
Employees
How you claim your employees on business taxes in RI can be a big issue for many small businesses. Some businesses try to treat or claim actual employees as independent contractors, which may not be accurate under the IRS definition of employees.
Mixing Funds
One of the most common mistakes that occur with business taxes in RI when a CPA is not involved in providing advice and consultation to the business is that personal and business funds get mixed. This mingling of funds not only creates bookkeeping problems but it could result in the IRS seeing both your business and personal financial dealings as one and the same.
Working with a CPA or accounting firm to prepare your business taxes in RI can prevent these common issues. It can also help you in claiming the deductions you are eligible for and even planning your tax strategy for the upcoming year.
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