19 minutes is all it takes me per week to have a worry-free tax season for my small businesses. I timed it, literally. You see, I’ve been studying up on how to maximize my small business tax deductions, and I’ve discovered what it takes to keep the IRS happy:
1. Know the rules as they apply to your business and follow them
2. Keep orderly small business tax documents
3. Have a great accountant
Now that might sound like a lot of work, especially the part about knowing the rules and documenting everything, but it doesn’t take long, really.
Discovering Small Business Tax Deduction Rules
So everyone knows that the IRS has rules, lots of them, and that if you don’t follow them you will get in dutch. What most people don’t know, though, is how to interpret those rules so they apply to you and your small business. And being that the tax code is some 18,000 pages long, it’s going to be pretty hard to figure out which small business tax deductions apply to your organization, and how, just by reading the tax code.
That won’t do at all, which is why you need an interpreter. I like Ron Mueller’s tax tips and books because they are easy for me to understand (check them out at www.homebusinesstaxsavings.com). The website is for home businesses but they apply to a lot of small businesses as well, especially if you keep a home office as well as a regular office. The best way to figure out how IRS laws apply to your business to get help from “Cliff Notes” tax interpreters like Ron. I’ve also gotten great information from other tax books for some of my businesses that are very specific, like my horse business.
Small Business Tax Documents – Maintaining Order
If “location, location, location” is the key to success in real estate, then “document, document, document” is the key to success in reducing your tax burden and defending your position, should the IRS ever inquire. While documentation sounds like a lot of work, it’s really not if you get into a routine. As I said earlier, it takes me on average about 19 minutes per week maintain my small business tax documents.
For anything you want to claim as a business expense or tax deduction, you basically have to document the who, what, when, where, and why. If you keep a strong business calendar or activities diary, most of the documentation can go in there. The rest can go into Quickbooks or some other similar bookkeeping software. If you do your documentation during the day or at the end of each work day, it literally won’t take you more than 19 minutes. I have three small businesses, and it only takes me that long.