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Using small business expense software to maintain compliance

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It can be all too easy for small business owners to fall afoul of expense reporting compliance laws by inadvertently combining professional and personal accounts. This course of action may seem less laborious than the arduous, ongoing task of ensuring all expenses are appropriately separated, but failing to adequately distinguish between business and personal expenses at tax time could have dire repercussions, notes a recent article by the Canadian Imperial Bank of Commerce (CIBC).

“If you own a business, you are required by law to keep adequate records,” said Jamie Golombek of the CIBC. “Failing to do so can cause extra hours of paperwork at tax time instead of focusing on your business and you could end up having to pay tax penalties.”

For company owners concerned about maintaining business expense compliance, Golombek recommended taking a three-pronged approach that involves separating personal and business expenses (ideally by keeping two different bank accounts), keeping thorough and timely records that distinguish between business and personal charges—the former of which can be deducted on a tax return, while the latter cannot—and seeking professional advice when necessary.

Compliance on a budget
Small business owners often find themselves constrained by tight budgets that don’t allow for them to hire accountants or financial advisers. In such cases, they can bolster their efforts to achieve and maintain compliance by incorporating small business expense technology into their operations.

Using software to automate tax-related activities can also help entrepreneurs reduce the amount of red tape they have to deal with, which was described as an “ever-growing patchwork of credits, deductions, tax hikes and sunset dates” by the National Small Business Association (NSBA). The NSBA’s 2012 Small Business Taxation Survey, released earlier this year, revealed that the complexities and inconsistencies of the federal tax code are problematic for many independent company owners.

“Nearly half of all small business owners spend 80 hours every year dealing with federal taxes, and two-thirds spend more than one full week,” said NSBA Chair Chris Holman, who went on to characterize the significant time commitment as “an unnecessary and massively unfair drain” on members of the small business community who have already been beleaguered by considerable economic turbulence in recent years.

Summary: Small business owners concerned about business expense compliance should be careful not to combine their corporate and personal accounts.


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