As part of my duties for Laughlin Associates, I travel around the country speaking to business owners about the importance of corporate or LLC compliance. Once one of these companies is formed the owners have ongoing responsibilities to document the decisions that these companies make. I try to teach that to people.

But one person will ask the question that the entire room is interested in learning: How can I make my business more successful and make more money? They usually follow it up with discussions about websites, blogs, or marketing. It seems that the perception is the only way to be more successful in business is to get more clients. That is logical, more clients equals more money. I get it. However, your business could be more successful without gaining another new client. What I try to tell them is that there is wealth hidden in your business that you don’t realize.

A recent study conducted by the federal government estimates that the average business owner over pays their taxes. Not by a little, but by a whopping $11,600 per year. Think about that. What could you have done with an extra $11,600?  How many additional clients would you have had to get to “net” that extra income? So why do we over pay? It’s simple. We don’t know the rules.

Taxes are such an interesting topic to hear from business owners. They seem to fear it. People will tell me the tax code is too complicated to learn, or that their CPA takes care of the taxes for the business. The responses seem to indicate an implied waiver of the reasonability, or a genuine fear of the topic itself. But no matter what you do in your business, you will always be more successful with just a little bit of tax education.

Now if I suggested to you that you need to learn the entire tax code that would be intimidating. But a little knowledge goes a long way here. All business owners have basic deductions that are available to them. This is true regardless of your business structure. They are: Entertainment, Travel, Gifting, Home Office, and Vehicle. Many of us take these deductions now. However, when I ask people about these rules I hear a lot of different and conflicting stories. As a result, how could a business owner be confident in claiming a deduction if they didn’t know the rules? Further, how assertive could you be if you didn’t know the particulars of the rules? Therefore, what happens next is deductions don’t get claimed and overpayment of taxes is the end result. Boy that fear can be crippling!

So how do you stop this? You decide that you can learn it! The tax code is not as complicated as people think. This is especially true in regards to the deductions we discussed above. As part of our paper work program we offer clients the tools and education to learn these deductions and many more. So if you have an opportunity to get involved with our compliance service I would strongly recommend it because this is something that we offer those clients. Also I can suggest a couple of publications that might assist. Sandy Botkin, CPA puts out an excellent series of books and CD’s on business taxes that are great. And of course, you can also log onto the IRS website and download their publications.

I learned an expression some time ago that I think is quite fitting here. Someone once told me that the definition of fear is: indecision plus doubt equals fear. I like that. If you don’t know what the IRS is expecting from you that can create indecision. Claiming a deduction your not sure about is creating doubt, so you don’t claim it. So of course you have fear. But remember F.E.A.R. is nothing more than False Evidence Appearing Real.

It is not too complicated, and it is well worth the investment. Remember you can conquer anything you put your mind too. I know you can do it!

Scott Burnett is a highly acclaimed corporate trainer and Laughlin Associates’ Director of Education.  He will be speaking at these locations and at our July Seminar in Lake Tahoe.

As business owners, you know that March 15th is right around the corner. Lots of us had a bumpy 2009 and may not be too worried about tax liabilities. That is the good news. The less than good news is the fact that the IRS has announced a step up in the percentage of audits that they will be conducting this year.  There are a number of factors that can put you at higher risk of being audited. None of which is more of a red flag than being a small business owner. According to Investopedia,  just being a small business puts you at the top of the target list. Do any of these apply to you?

Partnership/Trust/Tax Shelter Risk
If you own shares in a limited partnership, control a trust or partake in any other tax shelter investments, you are more apt to be audited. While there may be no way to avoid such an audit, individuals that have a stake in such an entity should be aware that they have a target on their backs. They should also take even greater care to document deductions, donations and income.

Small Business Ownership
Small business owners are an easy target – particularly those with cash businesses. Bars, restaurants, car washes and hair salons are exceptionally big targets, not only because they deal in so much cash, but also because there is so much temptation to under-report income and tips earned.

Home Office Deductions
Be careful with home office deductions. Excessive or unwarranted deductions can raise red flags. In addition, large deductions in proportion to your income can raise the ire of the IRS as well. For example, if you earned $50,000 as an accountant (operating from home), home-office related deductions totaling $30,000 will raise more than a few eyebrows. Trying to write off the value of a new bedroom set as office equipment could also draw unwanted attention.*

At Laughlin Associates, we work with thousands of business owners each year to help keep them on the right side of audit troubles.  Still, we hear horror stories all the time from people who didn’t take their business documentation seriously.  It is not enough to just use a credit card statement as your substantiation. You must document who, what, why, and how much. This can easily be accomplished if you know what to do and use some simple tools.  For more on this you can go to our resource page. Even as the President of The United States expounds on the virtues of owning a business and how small business owners create the vast majority of jobs in this country, the Tax Man is planning a visit to many of those business owners’ doors. The government must collect every nickel it can to try to stem the hemorrhaging caused by the recent bailout spending and other entitlement programs. We small business owners will be targets, sure, but we will also continue to find new and creative ways to make our businesses profitable.  We will invent, manufacture, sell, consult and barter our way through whatever hurdles are placed before us. We have always been that way. We always will be.  Just make sure that you dot your “I’s” and cross your “T’s” along the way.You can read the full Investopedia article here.