Welcome to part two of our four-part series: Four Ways You Are Paying Too Much in Business Taxes. Over the next few weeks, we will discuss some of the common mistakes that small business owners make when filing their taxes and what you can do to avoid making them. You can read part one here.
Four Ways You Are Paying Too Much in Business Taxes
At times, as business owners we feel like we are bleeding money. The rent goes up. That annual conference you attend is on the horizon. Your employees need a raise. The list goes on and on. Of course, increasing revenue is a good way to help with cash flow, but we are also happy when we discover ways that we can save money as well. What I’ve found in working with scores of business clients is that many are overpaying their taxes and not taking advantage of deductions to reduce their tax burden. We previously discussed how charitable donations can affect your taxes. Today, we will take a look at mileage.
Are you really tracking your business miles?
A second way that small business owners overpay on their taxes is by not accurately tracking or deducting mileage. This is serious business for the IRS. In fact, they ask point blank if you kept written records and if those records are accurate on the return. I will put it this way – we don’t work with clients who bring rounded numbers of mileage like, “I had 20,000 miles last year,” because the risk is just too high for us and for them. That’s tax fraud if you’re just making up numbers, and you’re clearly not complying with the IRS’ rules.
There’s good news, though. There are tools now that are so much better than the old-school handwritten mileage logs. The one I personally use is called Mile IQ. It’s amazing and makes it so much easier to categorize my miles. If you have not been tracking your miles, now is the time to start because otherwise you could be at risk for a lot of tax and penalties if you are ever audited.
Here’s the other thing, if you’re not really tracking all your miles and using a rounded number, there’s a good chance that you’re under reporting your miles. Do you really remember every single little business trip you took? Probably not, but Mile IQ tracks every drive as long as your phone is with you so you leave no money on the table.
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