No one wants to pay more than their fair share of taxes while staying on the right side of an audit. Yes, it's always best to stay under the radar of the IRS so I say take advantage of the allowable deductions but don't go too crazy.
Here's my BOLD Tax Tips:
1. No need to keep all of those pesky paper receipts anymore. There are several portable scanners like Neat Receipts or VuPoint and the IRS accepts scanned copies of receipts. Create folders for Gas, Auto, Meals, Travel, etc and then save the scans into the right folder...voila, your office no longer looks like a tornado hit it. And don't forget the scanner is deductible!
2. Auto Expenses: You can either take ACTUAL expenses or mileage but not both. If you have a car for business and another for personal it's easy to track but if you don't you can easily track the percentages by keeping a totally detailed appointment calendar to figure out business expenses. I know it's a pain to keep all of the receipts (see #1) so use a gas card for business and you'll have the statements showing all your expenses.
3. Bank and Credit Card Statements: I don't think anyone likes reconciling bank & CC statements but you've got to do it so you take all of your deductions. It's easy to think you're good until you start looking line by line...oops, there's that dinner from two months ago, and that gift you bought from Amazon and had shipped to a client, and that vacation that turned into a business trip. You're only cheating yourself if you don't take what's allowed.
4. Review personal financials: As business owners we can mix up personal and business credit, debit cards, or even write a personal check for business expenses. So repeat above for all of your personal accounts.
5. Cash or Accrual Basis: Cash means you count your income when you get the cash and expenses when you pay out the cash. Accrual means you count income when you send the invoice and expenses when you receive the bill. Accrual doesn't involve any money...it's all about timing. Most small businesses don't track Accounts Receivable or Accounts Payable so you're CASH but check last year's tax return to make sure. Once you file cash or accrual you can't switch so choose the one that will you give the biggest tax break.
