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Spaghettios, dog clothes & top tax tips

Our recent survey to over 400 accounting professionals reveals that Spaghettios, weddings and dog clothes are just some of the tax deductions people imagine they can get away with. Which shows that if you’ve ever tried to claim an unusual tax deduction, you’re not alone!

This year’s survey provides an update to a similar survey we commissioned last year. The year-on-year data provides  interesting insight into changing perceptions of the cloud as well as where small businesses are going wrong. As well as the fun responses, the research highlights just how much pressure small businesses are under in the US this tax season, especially due to the demands of changing government regulations and tax policy.

We’ve put together an infographic to illustrate the key results:

A key output of the survey is the biggest mistakes that small businesses are making. Top of the list is not keeping financial records up-to-date, followed by a lack of understanding about tax obligations.

All-in-all, it comes back to getting to know your accountant better and tapping into the advice they can give you. Xero’s real time single ledger enables your accountant to have a clear view of your finances and provide better advice to you. Note that nearly a third of the accountants surveyed would be willing to give you a discount if you enable them to view a reconciled ledger, which is easy to do in Xero. And more and more accountants are offering cloud services – up 11% to 43% this year.

Top US Tax Tips from our network of Xero Advisors:

  • Record receipts remotely: Establish and maintain an accurate system for storing your receipts. Today’s cloud-storage technologies offer a gamut of easy and affordable ways for SMBs to keep track of their expenses. Xero even has a mobile receipt capture. One click from your camera on an iOS or Android device and bid adieu to the crumpled receipt.
  • Beautify your business: Section 179 of Small Business Expensing allows SMBs to deduct the full purchase price of qualifying equipment and/or software up to $500,000. This is a 2013 tax extension, but it was on the “chopping block”. Take no chances come 2014 and bolster your business needs (and upgrade).
  • Home is where the smart is: Starting in 2013, the home office deduction offers a simplified form that caps the home office deduction at $1,500. The new form is a great option for those who choose not to spend the time calculating home offices expenses, depreciation and carryovers of unused deductions. This is NOT a replacement of the traditional home office form. Taxpayers can still file the original form if their home office exceeds $1,500.
  • Tax changes for tax time:
    Payroll tax: The American Taxpayer Relief Act did not extend the payroll tax, but the two percent “break” was only a couple of years old (2011 & 2012). This change is more of an unfortunate recant, than a tax hike.
    Healthcare tax: Under the Patient Protection and Affordable Care Act (PPACA), beginning in 2013, higher income taxpayers must start paying a 3.8 percent additional tax on Net Investment Income (NII). Additionally, high earners will incur an Additional Medicare Tax of 0.9 percent on wage and/or self-employment.
  • Accounting season is every season: Make time for your accountant year-round, not just during tax season. Select an accountant with a fixed fee and value price that includes tax and accounting services. There is no excuse for improper planning and proper financial counsel brings peace of mind and money.
  • Money for the taking: Out-of-pocket expenses landed as the number one overlooked deduction followed by auto expenses according to Xero’s survey. So track those miles, save those dinner receipts, and write off that iPhone 5 – it will all add up in the end.

 

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