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Small business tax-time trends

As the tax deadline for tax year 2013 quickly approaches and businesses across the US rush to prepare essential information for their accountants, the spotlight is thrown on small business tax issues.

For the third year running, we surveyed 400 accounting professionals across the country to get their take on which tax and accounting issues are plaguing small business.

Some of the information we gathered was both informative and interesting. When asked what is the strangest item their clients have tried to write off, more accountants say a family or personal trip disguised as a business trip than any other item. The top five strangest items after that include an animal or pet, pet supplies, food or groceries, and a swimming pool or hot tub – in that order. Although not as common, some particularly interesting items include a face lift, a robot and Girl Scout cookies.

We’ve presented some of the most interesting and helpful information in this infographic:

Xero Tax Time Infographic

Small business tax issues in 2014

While some accounting issues have not changed over the past three years, there are some marked differences that appeared this year. The Affordable Care Act (ACA), which was not on the radar in 2012 or 2013 because it had not yet been fully implemented, does show up as a concern for many accountants. It tops the list of important issues to watch in the 2014 election cycle and tops the list of challenges in 2014 facing small businesses according to accountants.

Another notable change over time is the percentage of accountants who say they are going to be offering online services. As technology continues to improve and astonish users with how essential it has become in all aspects of our lives, the use of technology via online services has increased as well. In 2012, one in three accountants said they were going to offer online services to their clients. In just three years, that has increased to more than half (55 percent).

Common small business accounting mistakes

When asked what the most common mistake facing small businesses is, accountants said that only speaking with their accountants during tax time is the greatest mistake. This remark overtakes “no-real time understanding of business finances,” which topped the list in both 2012 and 2013. With the implementation of the ACA and possibly an increase in the minimum wage among other issues, accountants are seeing the need for more consultation and communication throughout the year with their small business clients.

In addition to the most common mistakes facing small businesses, factors which are likely to trigger an IRS audit have essentially not changed over the course of the study, according to accountants. Mixing business and personal expenses topped the list in 2012 and 2013 and ties with claiming excessive deductions in 2014 as the key triggers.

Essential lessons from the study

There are some perennial accounting issues that plague small businesses, including:

  • not speaking often enough with their accountant

  • not keeping a close enough eye on the business’ finances

  • leaving tax preparation only for tax time instead of planning all year.

Check out last year’s blog article and infographic: Spaghettios, dog clothes & top tax tips

And the 2012 version: Where small businesses go wrong at tax time

 

Read more about Company News

 

1 comment

grant
21 July 2014 #

hi there I wish to bring to your attention that Tax Time is a registered trade mark, please refrain from using this

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