SAN FRANCISCO, CA — (Marketwire) — 03/19/13 — Tax season has always been overwhelming for small business owners, which may explain why some small businesses (SMBs) have shown questionable judgment, claiming spaghettiOs, plastic surgery and undergarments as deductions, according to a new survey of accountants. This year poses even greater anxiety based on policy changes from Washington. In fact, the second annual survey from Xero, , found that nearly one in four accountants say government regulations and tax policy had the biggest impact on small businesses this year — more than one in 10 attribute this to uncertainty surrounding the “Fiscal Cliff.”
According to the 400 U.S. based accountants polled, the biggest mistake small business owners make is not keeping their financial records up-to-date, followed by a lack of understanding about their tax obligations. To best prepare for the changes ahead while staying on top of traditional challenges, small business owners must know their financials (and financial partners) better.
“The most common question I-m asked is, -How can I save more money? I-m scared of all the new tax increases,-” said Jody Padar, Xero partner and CEO and principal of the . “I wish I could provide a universal answer, but the fact is no two businesses are alike and there are many factors involved in financial planning. What I can say in all confidence is to keep a close eye on your finances, find an accountant you like and trust, and see them at least once a month.”
Small businesses that employ this approach will not only save time, but most importantly, money. A full 72 percent of accountants feel they could provide better advice if given a real-time view into their client-s finances, and nearly one third would be willing to offer discounted fees to sit down to a reconciled ledger. Fortunately, cloud accounting makes this possible, and it-s on the rise. In 2013, 43 percent of accountants are planning on offering cloud services, an 11 percent increase from last year.
“More and more small businesses are realizing the benefits of real-time access to their financials. And our survey provides validation on the importance of cloud-based offerings. We saw impressive adoption in 2012 and expect to continue to grow rapidly,” said Jamie Sutherland, Xero President of U.S. Operations.
Xero has a dedicated network of expert accountants who provide insight and best practices for small businesses. Below are tips from Xero-s accounting partners who offer advice that SMBs can employ for tax time and throughout the year.
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.
: 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).
: 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.
What SMBs to know.
: The American Taxpayer Relief Act did not extend the payroll tax, but the 2 percent “break” was only a couple of years old (2011 & 2012). This change is more of an unfortunate recant, than a tax hike.
: 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 . Additionally, high earners will incur an of 0.9 percent on wage and/or self-employment.
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.
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.
Zogby Analytics was commissioned by Xero Limited to conduct an online survey of 400 accountants in the U.S. The survey was conducted from February 14 through February 21, 2013. Based on a confidence interval of 95 percent, the margin of error for 400 is +/- 5.0 percentage points. This means that all other things being equal, the identical survey repeated will have results within the margin of error 95 times out of 100.
Xero is beautiful, easy to use online accounting software for small businesses and their advisors. The company has over 135,000 paying customers and 200,000 users in more than 100 countries around the world. Recently Xero garnered a for Software As Service from CPA Practice Advisor. Xero-s U.S. team is based in San Francisco. Xero is hosted with Rackspace in Chicago. See
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