Article The Taxman Cometh

 

Most of our distributors have started their taxes already. If you haven't get started right now! In any case, we cannot give you expert tax advice beyond some simple guidelines, but while this tax season is fresh in your minds, we can pass on some advice that might help you revise your returns, and to make next year's tax preparation easier.

We strongly urge you to write down every expenditure, income, and mileage; keep receipts in a filing system that makes sense (no, a shoebox just won't do!); and use a tax preparer knowledgeable in small business taxes. This allows you to take advantage of the unique deductions allowed small businesses; after all, those deductions are one reason you started your own business! Don't forget accelerated depreciation on new equipment purchased.

Whether you're a sole proprietor, have a limited partnership, or are incorporated, it's imperative that you don't mix your normal family tax information with your business information. If you've been using the family checking account for business, let's face it-it's probably a mess. Unravel and detail that mess before you dump it on your accountant's lap. Also, open up a separate business account at your bank so you don't make the same mistake next year.

Some people are unsure about how long to hold on to old returns in case of an audit, so here are rules from the Internal Revenue Service:

. The IRS has three years from either the due date of a return or the date the return is actually filed-whichever is later-to initiate an audit. For instance, if you filed your 1999 tax return on August 15, 2000 (after filing for the four month extension), the IRS would have until August 15, 2003 to audit that return. There's also a six-year statute of limitations if they feel there has been a substantial understatement of income. Be sure to check with your state's tax agency as well. Statutes of limitations vary by state; some are as long as four years. A safer rule of thumb is to keep your returns until the first day of the year that is five years later than the year to which the return applies. It's also very important to keep all the supporting documentation and information for that specific return until you toss the return-don't just keep the return! Yes, it's a hassle to keep all those stubs, receipts and scribbled notes, but better to be safe than sorry.

. Finally, it's worth the cost of using a professional tax preparer to get your returns done correctly. You'll have peace of mind because your taxes were prepared properly-and that you got every deduction allowed!