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Starting a small business? Tax tips from the pros

One of the biggest potential tax pitfalls faced by small businesses as they are getting started also is perhaps the most avoidable, according to the experts.

One of the biggest potential tax pitfalls faced by small businesses as they are getting started also is perhaps the most avoidable, according to the experts.

Many fledgling small-business owners fail to track their business and personal finances independently, explained Joseph Mastriani, shareholder with Allentown accounting firm Buckno Lisicky & Co.

“The No. 1 mistake I see small-business owners make is not separating their business income and expenses from their personal and maintaining a single bank account that commingles business and personal activity,” he said. “This practice invites potential missed tax deductions, unreported income and increased scrutiny by the IRS [Internal Revenue Service].”

Starting a small business is daunting enough for an owner, but keeping an eye on tax obligations is important. Experts advise to keep things organized, investing in the right technology tools to support the financial side of their operations, and not being afraid to seek out the support of experts when needed.

Experts also said that hiring an accountant is not mandatory when starting a business and suggested that most small-business owners should be able to handle day-to-day accounting on their own, using off-the-shelf computer programs.

Thomas Kauffman, a partner and leader of the tax services group for Reinsel Kuntz Lesher LLP, stressed the importance of good record-keeping.

“If the IRS audits you, you do not want to wing it,” said Kauffman, a Certified Public Accountant based in RKL’s Wyomissing office. “When things aren’t separate, then it really becomes a lifestyle audit, and they will go through your personal bank records.

“They are looking for unreported income. The more you can have good records for just your business is just extremely important.”

Andrew P. Kahn, a CPA at Concannon Miller, Hanover Township, Northampton County, suggested that small-business owners buy accounting software such as QuickBooks.

“Get trained on how to use it and record the activity daily so you can analyze the operating results and be proactive,” said Kahn, a shareholder at Concannon Miller.

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