Thursday, February 28, 2008

Top Three "Don'ts" For Small Business Owners

Disguise personal expenses as business expenses

  • Claiming 100% deduction for a vehicle that is used for both business and personal purposes

  • Claiming deductions for your spouse’s automobile, cell phone, gas, etc.

  • Claiming deductions for your children’s automobile, cell phone, gas, etc.

  • Pay workers “off the books”

  • Cannot deduct payments to workers if you do not issue corresponding W-2s or 1099s

  • Workers Compensation Insurance carriers are cracking down on ATM Withdrawals, Cash Withdrawals, and checks made payable to cash as the cash is typically used to pay workers “off the books”

  • Claim the Home Office Deduction if you own your home

  • While you may save a few hundred dollars each year you claim the deduction, doing so will not only expose your tax return to a high audit risk, but you may end up paying back thousands in additional taxes when you eventually sell your home

  • If you rent, the deduction is much more advisable…although you will still experience a high audit risk, you will not have any long-term negative tax consequences

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