NEW YORK – Small business owners who compile their own income tax returns can find themselves falling into some common quicksand pits. The mistakes can be costly if they raise a company’s tax bill unnecessarily or subject it to penalties and interest in the future.

Some of the problems are mechanical in nature, such as not filling out the right forms. Others are more strategic, including not considering how the deductions you take on your 2009 return might affect your taxes in future years.

Other mistakes are the result of owners not being well informed about the tax laws and the requirements they can impose, for example, on an owner’s salary or the way employees are classified.

A look at some of the common problems business owners encounter at tax time:

RECORDS, RECORDS, RECORDS

Accountants say many owners’ mistakes begin long before they start filling out tax forms because they keep poor records.

Joseph Maloney, a certified public accountant with Maloney Reed Scarpitti & Co. LLP in Erie, Pa., said that leads many owners to have a hard time determining, for example, how much of their vehicle expenses they can deduct. Without mileage logs or diaries, they don’t know how much a car or truck was used for personal errands or for business purposes. He said owners who don’t keep separate checking and credit card accounts for personal and business expenses can also run into problems.

FILE ALL THE RIGHT FORMS — AND FILL THEM OUT PROPERLY

Another common mistake occurs when owners don’t file the forms needed for some specific deductions.

One is related to the deduction for a home office. Many owners using Schedule C, Profit or Loss from Business, or one of the 1120 forms for corporations, don’t realize that they have to also complete Form 8829, Expenses for Business Use of Your Home,to deduct business-related home expenses. Instead, they’ll use the lines for items like “repairs and maintenance” or “other deductions” for deductible home expenses.

Similarly, owners claiming the Section 179 deduction for equipment purchases may lump those expenditures together under a Schedule C line like “supplies,” Maloney said. The deduction allows owners to deduct up front rather than depreciate over years the cost of many kinds of equipment. To claim it, owners need to complete Form 4562, Depreciation and Amortization.

Maloney said owners often make a mistake when they enter the amount they paid for their own health insurance. That goes on the front page of Form 1040. Employees’ health insurance is listed on Schedule C.

These are problems owners don’t have if they use tax prep software. The programs will remind users that additional forms need to be completed. And they’ll insert data in the right places.

INDEPENDENT CONTRACTOR OR EMPLOYEE

Many small businesses that laid off employees have taken on freelancers when they need extra help. That means the company doesn’t have to pay employment taxes including Social Security and Medicare. But it also means companies need to be completing 1099 forms and submitting copies to the government and the freelancers.

Owners also need to be sure that they’ve been treating these freelancers like independent contractors and not employees. If an owner controls aspects of the job including where the work is done and the hours that are put in, the IRS is likely to consider the worker to be an employee rather than an independent contractor. If the employer hasn’t been paying employment taxes, he or she faces penalties.

Alan Weiner, a certified public accountant with Holtz Rubenstein Reminick in Melville, N.Y., gives this example of an employee and an independent contractor: “A plumbing supply house has a delivery man working, gives him a truck, tells him what time to come in, gives him a lunch hour … versus someone with a delivery business and who works for several people.”

The IRS has information about the differences between employees and independent contractors on its Web site at http://www.irs.gov/businesses/small/.

S CORPORATIONS

Weiner said a common mistake owners make, and that the IRS is on the lookout for, happens when a company has what’s known as S corporation tax status. Under an S corporation, the income passes directly to shareholders who are taxed on that money. The business does not pay its own income taxes, as is the case with C corporations, the status held by major corporations.

The problems that arise with S corporations happen when owners who are also employees take too small a salary and receive the bulk of the money as a shareholder distribution. Because it’s a distribution, and not a salary, they don’t have to pay employment taxes. That’s a violation of the tax code.

“The S corporation owner or owners have to pay themselves, in IRS language, a reasonable salary,” Weiner said. And pay the taxes on that money.

NOT SO FAST

Completing tax forms isn’t just a matter of plugging numbers into little boxes or lines. Owners need to be making decisions along the way. And thinking ahead. If you don’t you could be costing yourself money, and not just for 2009

For example, while it might be tempting to use a full Section 179 deduction, it might make more sense to depreciate the cost of the equipment over time. That’s especially the case if you think business will be picking up this year.

For example, “you have to think about whether the tax rate is going to be higher in 2010 and beyond than it was in 2009,” said Bob Steere, an analyst with Business Owner’s Toolkit, a division of Wolters Kluwer. “It might be beneficial to have more of those deductions and expenses when they’re potentially going to be at a higher tax rate.”

“You really want to think through how all of things are going to impact (your taxes) before you make the final decision,” he said.

NEW YORK (Reuters) – Four top executives of Thornburg Mortgage (THMRQ.PK) improperly paid themselves handsome bonuses just before the mortgage lender filed for bankruptcy last year, and stole money and ideas from Thornburg to secretly launch a new firm, the bankruptcy trustee in charge of liquidating the lender alleged in a lawsuit.

In an 82-page complaint filed on Tuesday in U.S. bankruptcy court in Baltimore, the trustee, Joel Sher, said the four executives and their outside lawyer and law firm conspired to launch a new company, called SAF Financial, using a strategy created by Thornburg to try to save itself.

The trustee alleged that former Chief Executive Larry Goldstone, former Chief Financial Officer Clarence Simmons, and former Vice Presidents Deborah Burns and Amy Pell began planning for the new company in the months and days ahead of Thornburg’s bankruptcy. The plan was to purchase a small thrift that would give the company access to deposits and Federal Home Loan Bank funds for issuing mortgages, according to the lawsuit.

The trustee is seeking to recover at least $12 million in misappropriated funds and millions from other claims, including thousands of dollars worth of bonuses he contends the executives secretly paid themselves ahead of the bankruptcy.

“Faced with an impending bankruptcy, two of the Debtor’s (Thornberg’s) senior officers, together with one of the Debtor’s most trusted attorneys, embarked upon a multi-faceted conspiracy in which they converted substantial amounts of the Debtor’s cash, proprietary and confidential information and used the Debtor’s personnel and fixed assets to start up a secret new business venture,” the trustee said in the complaint.

The suit alleges the Thornburg executives caused the company to switch bankruptcy lawyers so they could execute their secret plan, improperly caused thousands of dollars to be paid to vendors and employees from Thornburg’s funds for the benefit of their new venture, and hid, lied and covered up all that they were doing from the company’s creditors and directors.

“Over a thirty-day period, in an unchecked frenzy of self-dealing and wanton and reckless breach of fiduciary duty and loyalty, Messrs. Goldstone and Simmons caused TMST (Thornburg) to make payments to themselves and their cohorts in the aggregate amount of $842,000.00,” the trustee wrote in the lawsuit.

“The complaint is obviously a one-sided story that’s been told by the trustee, and when the other side is told it will be obvious that the claims are without merit,” said Mark Salzberg, an attorney at Patton Boggs in Washington representing Goldstone, Simmons, and SAF Financial. Burns declined to comment on the lawsuit and Pell did not immediately return a message left at her home.

The trustee’s lawsuit also named attorney Karen Dempsey of the San Francisco law firm of Orrick, Herrington & Sutcliffe and the firm itself as part of the alleged conspiracy.

Pamela Phillips, a San Francisco attorney at Howard Rice Nemerovski Canady Falk & Rabkin representing Orrick and Dempsey, said the trustee’s allegations were “outrageous” and that the trustee had not reached out to the law firm prior to filing the lawsuit.

“We believe that Ms. Dempsey provided valuable advice to the debtors both before and after they went into bankruptcy and that her advice was extremely helpful to the company,” Phillips said. “We think the bankruptcy trustee is looking for a deep pocket rather than addressing the actual facts at hand.”

Sher was appointed as the trustee in charge of liquidating Thornburg in October, after a whistle-blower letter to the company’s creditors brought the accusations against the executives to light and Goldstone and Simmons resigned.

Thornburg, once one of the leading providers of ‘jumbo’ residential mortgages, filed for bankruptcy protection last May with $24.4 billion in assets, making it one of the largest bankruptcies of 2009.

The company, which changed its name to TMST Inc, represents one of the largest failures of the subprime mortgage crisis and is now mostly liquidating. The trustee recently agreed to sell its prized $11 billion mortgage servicing portfolio, and its former ADFITECH mortgage industry services unit is reorganizing on its own.

Warren Buffett described Berkshire Hathaway’s (NYSE: BRK-A – News; NYSE:BRK-B – News) acquisition of Burlington National Railroad as a long-term bet on the American economy. In his book The Next Hundred Million: America in 2050, author Joel Kotkin presents data that supports Buffett’s thesis, arguing that despite its current economic woes, the U.S. will remain an economic powerhouse over the next four decades.

Kotkin’s claim rests upon the demographic boom going on in our own backyard. The U.S. population is expected to grow by 100 million by 2050. This growth makes America an outlier; during this time, America’s economic peers will suffer from low birth rates and stagnant population growth. By 2050, a third or more of the populations in Europe and East Asia will be over the age of 65, compared with only a fifth in the U.S.

This means that the U.S. will face a unique set of challenges come middle-century. While its peers struggle with rapidly aging populations and potential labor shortages, the U.S. will need to provide its younger populace with ample economic opportunities. Kotkin theorizes that America’s entrepreneurial bent, willingness to embrace creative destruction, and openness to immigration will all work to meet this need. The result will be a population that is younger, more diverse, and more dynamic than most other nations — and a vibrant economy.

Whether or not you agree with this rosy scenario, investors with a truly long-term horizon will want to ask themselves what companies might benefit from America’s coming demographic dividend. That’s a tough question; much will change by 2050, just as many companies and technologies came and went in the last forty years. But it puts Buffett’s railroad purchase in perspective. Railroads are as vital to U.S. commerce today as they were in 1970, and should benefit greatly during Kotkin’s predicted 40-year population expansion. Even better, they have inherent moats.

Following Buffett’s thinking — steady infrastructure plays with built-in moats — leads to companies not often associated with growth, like utilities. ConEd (NYSE: ED – News) and Southern Company (NYSE: SO – News) are conservative plays with a protected business and excellent dividends. California Water Service Group (NYSE: CWT – News) and Mueller Water (NYSE: MWA – News) will also grow with increasing populations. Obviously, investors shouldn’t build their portfolios around utilities alone, but even these sleepy stocks may appreciate nicely if Kotkin’s thesis plays out.