Tax season is upon us again, and whether you are an entrepreneur who is just getting your feet wet or an experienced small business owner, there are many tips and tricks to save you money on your taxes.
TIP 1: Organization is King
The biggest thing to keep in mind is to be organized 365 days a year, not just at tax time. Keep all your business-related receipts throughout the year. From small expenses to the big ones, they are all important and add up to big savings. File receipts systematically and in a safe place. Bear in mind: It’s vital to separate business and personal expenses. You should have separate checking accounts and credit cards, or you make your life harder.
TIP 2: Take Advantage of the Healthcare Tax Credit
It’s offered on a sliding scale. Businesses that employ fewer than 10 full-time-equivalent employees (FTEs) with average wages under $25,000 per person get the most benefit. To claim the credit, https://www.irs.gov/uac/Form-8941,-Credit-for-Small-Employer-Health-Insurance-Premiums use form 8941 to calculate your eligibility. If your business did not owe taxes in that year, you may be able to carry the credit forward. If a remainder of the tax premium exists, you can claim business expenses against it.
TIP 3: Issue 1099s to Vendors and Outside Contractors
Anticipate which ones you will pay more than $600 to over the course of the year so you can send them 1099-Misc forms.
TIP 4: Leverage Tax Breaks from the Small Business Jobs Act of 2010
Although designed to increase the availability of credit for small business, it also provides $12 billion in tax relief to help small businesses. These incentives include many tax decreasing initiatives for things such as cell phones and health insurance.
TIP 5: Donate Unused or Unsold Business Inventory
Don’t waste money storing or trashing it. This way you are helping the environment and your business, is getting a tax deduction. Keep in mind: Donations greater than $500 have more rigorous reporting rules.
TIP 6: Donate Appreciable Stocks Instead of Money
As you probably know, you can also claim charitable donations. But to maximize your deduction, donate appreciable stocks instead of money. You can deduct the worth of the stock at tax time, not the worth at the time of purchase. So if the stock appreciates, you get a bigger piece of the pie on that deduction.
TIP 7: Just Launched Your Business? Get A Break on Capital Expenses
The costs related to launching a business are considered capital expenses. This means you can deduct up to $5,000 your first year in business. Capital expenses are considered assets in your business, and in general, there are two other types of costs you capitalize, besides start-up costs: Business assets and improvements.
TIP 8: Work from Home?
Claiming a home-office deduction isn’t that scary. The IRS will be on board when you’re smart about your deduction. If you have an actual home office, meaning a space dedicated solely to your business, deduct it. If you use only part of your kitchen or living room to conduct business, it takes a little bit of math to figure out the correct, IRS-friendly calculation. Measure your work area and divide by the square footage of your entire home. That percentage is the fraction of your home-related business expenses (mortgage interest, insurance, utilities, repairs) that you can claim.
TIP 9: Vehicles – Mile or Gas?
If you drive for your business, track your business-related driving mileage. You can also deduct your actual auto expenses, but when gas prices are high, it’s a better deal to take the mileage deduction. There are mobile apps available that make it easier to log your mileage.
TIP 10: Always Consult a Tax Professional
They can help you get the most savings. And file your taxes so they’re accurate and on time. After all, no one wants to get audited. And in case the IRS comes knocking, don’t stress. Remember the first tip and always be organized. Most often, it’s a simple problem to resolve. Save yourself the migraine. Talk to your tax professional, who can advise you. (If they’re also an Enrolled Agent, they can also represent you before the IRS.) Always be ready to send the IRS the information they ask for. That way, chances are your case will close as quickly as possible.