There are 10 days left before the end of the tax year. The Chamber of Commerce of Hawai’i hosted a seminar with some tax advice for businesses. HPR’s Wayne Yoshioka reports.
Every business is unique. But, as business owners prepare to file their tax returns, there are some general guidelines to follow. Matt Smith is a certified public accountant –CPA – and a financial advisor.
“Do not buy things just ‘cause you think it’s gonna lower your taxe bill. There’s a difference between a deduction and a credit. A credit is a dollar-for-dollar tax benefit. A deduction lowers your taxable income from which your tax is calculated on. So if you go buy a new two-thousand-dollar surface book, you’re not going to get a two thousand dollar reduction in your tax. You’re gonna get whatever your tax effect is.”
Smith says about 2 percent of tax returns are audited by the Internal Revenue Service but his company does not take chances by claiming deductions that cannot be substantiated. CPA, Aaron Williamson, says other than charitable donations and non-pre-taxed individual retirement accounts, the biggest savings are if you estimate how much you owe in taxes and file for an extension.
“With that extension form you want to also submit check with an estimate of the amount you believe that you’re gonna be obligated to pay. If you do that and you file by your extension date, you won’t be penalized. So that’s probably one of the biggest areas where you can realize some real savings.”
Both CPAs recommend you provide audit-proof documentation... consult a CPA and review previous returns. But, Smith says, this is a no-no.
“Do not walk in with a bag full of receipts. I’ll charge you for that. And to be honest, if you have a bag full of receipts and it says ‘Home Depot’ I have no idea if that’s for your personal home or for your business, so I’m gonna have to ask you, which adds more time.”
CPA, Reg Baker, is co-chair of the Chamber of Commerce Hawai’i small business and economic development committee. He maintains there’s a myth of who provides more individual income taxes in the U.S.
“Seventy percent of all taxes were paid by the top 10 percent. AGI, adjusted gross income, is only $138,000. The bottom 50 percent, half the population, pays 2.83 percent.”
For HPR News, I’m Wayne Yoshioka.