SPEAKER | TAX ACCOUNTANT | BUSINESS COACH
Tax Season is just around the corner! As we prep for this busy season at Grant’s Financial Services, I’m sharing some insights on how you can make sure you stay in good standing with our buddy Uncle Sam and keep him out of your business.
Who is the IRS and why does it exist?
“The roots of the IRS (Internal Revenue Service) go back to the Civil War when President Lincoln and Congress, in 1862, created the position of commissioner of Internal Revenue and enacted an income tax to pay war expenses. In the United States, the Congress passes tax laws and requires taxpayers to comply. The taxpayer’s role is to understand and meet his or her tax obligations. The IRS role is to help the large majority of compliant taxpayers with the tax law, while ensuring that the minority who are unwilling to comply pay their fair share.”
In short, the I.R.S. helps the country regulate and monitor tax dollars, tax dollars that are ultimately used to maintain government, community programs, schools, city infrastructure, etc.
Common Tax Mistakes
How To Avoid Getting Audited
Consistency is important to the IRS. Any shifts in income are considered red flags, specifically dramatic shifts downwards. For example, if you report $200,000 for the past three years and then only show $100,000 on your next return, you would be targeted for an audit.
On Schedule-C tax returns, any round dollar amounts are also a red flag that can trigger an audit. This is because the assumption is that everything is estimated, so if you have mileage expenses at $5,000, advertising at $10,000 and office equipment at $6,000 it sets off a few alarms. In real life, these amounts usually never equal up to round dollars, so be sure to count every dollar and penny when reporting your expenses.
Being audited by the IRS is the average taxpayers biggest fear. However, if you follow these guidelines and always consult your tax professional, even if Uncle Sam comes knocking on our door, you’ll come out victorious.
Prep for tax season by scheduling your appointment early! Scheduling early will also buy you time if you need to schedule a follow-up meeting. Good news! I'm still taking new clients and would LOVE to work with you.
Call us today to schedule! 312.265.1414 or Book instantly online here.
1. Set Short and Long Term Goals
Before you start a business you should have a plan. If you fail to plan then you plan to fail. Every new business owner should have clear and specific goals and know exactly what you want from your business. A business plan is essential tool. You will need a business plan not only to obtain financing but to map out the overall direction of your company. How much money do you want to make? How many employees? Who is my competition?
These are just a few examples of questions that should be answered PRIOR to starting your business.
2. Have “Cash” and know the cost of doing business
Cash and the flow of cash is essential to any small business. Many small businesses fail within the first five years and cash flow is generally the root of all small business failures. Know your start up costs (incorporation fees, business cards, advertising, telephone, office space rent etc.) When your new business venture opens the doors for the first time there is no guarantee that customers will come pouring in. With that being said, in addition to the start up costs a new business owner should have sufficient operating expenses for the initial 3-6 months. Operating expense consists of salaries paid to employees, research and development costs, legal fees, accountant fees, bank charges, office supplies, electricity bills, business licenses, and more.
As small business owners, we are inspired to action but you truly need capital i.e. “cash” to grow your business.
3. Legal Formations
One of the most important decisions when starting a small business is to choose the legal formation under which your business will operate. The business could be a sole proprietorship, subchapter S corporation, corporation, limited liability company (LLC), not for profit and or general partnership. Understand the different entity choices and discuss and discuss the options with attorney or tax accountant. Also an accountant can assist with cash flow analysis included with the business plan.
4. Seek proper counsel
Many small business owners try the “do it all yourself” model. This may be the most cost effective model, however this is one of the main things I have noticed that cause many small businesses to fail. Every successful business (McDonalds, Walgreens, Target)in their internal offices they have an accounting, human resource, legal, marketing departments.
Why do we as small business owners think that we can successfully wear all of these hats? My suggestion is that what you are not skilled at…seek proper counsel.
5. Remember Sales = Income
Business owners need to remember that in order to make money you must learn to sell. If you are not a natural born sales person then you must find a way to obtain skills in this area. To obtain skills I suggest purchasing appropriate business books, join networking groups, hiring someone with sales experience.
If you are ready to start your small business contact me at 312- 265- 1414 so I can help you develop a plan to ensure your success.