Are Your 2015 Tax Returns Filed?
The last deadline for 2015 personal tax return filing looms. I hope that you’ve completed your tax returns. If you haven’t, is the necessary information in proper order?
Filing tax returns isn’t at the top of the average person’s bucket list. And the IRS doesn’t make filing a personal tax return easy. The instruction booklet for filing Form 1040 is over 100 pages! Taxpayers that are self-employed must further crunch their numbers for accurate revenue and expenses to file Schedule C.
Consequently, if you’re self-employed, take extra care to get the numbers right!
The typical self-employed individual can easily run a business via their personal checking account. That often leads to the mixing of personal and business funds. As a result, mixing personal and business expenses can lead to an unpleasant experience if the IRS audits your tax return.
I doubt that an audit of your tax return is on your bucket list. If you have legitimate business expenses that offset revenue, claim them. Always maintain receipts to verify their business related necessity. If you’ve just started a business, the expenses are likely to be out of proportion to revenue. That is, expenses are higher than they would be under normal and on-going operations. That situation’s okay if the expenses can be validated. Or what if the business takes a downturn but expenses, such as rent, hold constant? That’s okay too if the expense is legitimate. A caveat – don’t claim business losses year after year. Continual losses may trigger the IRS’s attention. If a legitimate business isn’t making a profit, the IRS could assume that the business operates to avoid taxation.
Specific expenses to consider are the home office deduction and business entertainment.
A home office can be deducted as a business expense if a defined area of your home is designated solely for business,use. Claim the appropriate footage as it relates to the business.
The IRS doesn’t fool around with inappropriate business entertainment expenses. When claiming this type of expense, document what client you’re entertaining and the business related purpose. The who, what, where, when and why is important.
If you use a vehicle for personal and business purposes, keep track of where you go and why you go there. Consistently document business uses of a vehicle.
Bookkeeping in the cloud can help you organize your personal and business expenses so that pesky tax returns can be completed efficiently.
Always consult with your tax advisor for up-to-date advice on your particular situation.