Starting a small business can be an exciting, overwhelming, and busy time for a new small business owner. This article will give small business owners information on how to stay organized and how to save money for their new small business! Listed below are Seven Important Tax Tips for Small Businesses.
1. Get Organized and Stay Organized
For a small business to run efficiently and generate income, organization is vital. Good tax planning also requires effective organization. First of all, keep very good records of what you spend money on for your business! Keep a daily log of your expenses. Detailed records make your tax return much easier to prepare, plus they are an easy way to clearly see all of your legitimate business expenses.
2. Take Advantage of Tax Deductions
This is the easiest way for a small business to save money. Business owners must be of aware of all available tax deductions. This is important because most businesses do not claim everything they can. Here are some of the most common deductions available to small business owners: health insurance, home office (more to come), capital assets, meals, travel, and entertainment. Be sure to ask your CPA about specific deductions for your small business.
3. Avoid Being Audited
Unfortunately, small business owners sometimes catch the eye of the IRS in regards to audits. There are certain areas where small business owners need to be especially careful. One of these areas is the home office deduction. Refer to the following link for further information: http://www.irs.gov/uac/Work-From-Home%3F-Consider-the-Home-Office-Deduction Another red flag to the IRS for a small business owner is claiming a deduction that exceeds the income of the business for more than one year.
4. Understand Health Insurance
Do you have health insurance for your employees? If so, it is important to find out if you are eligible for the small business health care tax credit. Refer to this link from the IRS webpage for further, detailed information: http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-for-Small-Employers
5. Keep Abreast of Payroll Taxes
Payroll taxes can be a common and expensive tax issue for small business owners when they use payroll taxes withheld from their employees to finance business costs. The IRS is always on the alert for this practice. When it occurs, they can assess steep penalties and even go after the business owner’s personal assets.
6. Deduct Business Equipment
As of 2011, a small business is allowed to deduct up to $500,000 for equipment purchases as long as the business has spent a total of $2 million or less for equipment during the year. It is important to note that the cost of equipment repairs can usually be deducted as well. Consult with your CPA or tax professional for further suggestions about work related material costs.
7. Enlist the Services of a Tax Professional
Business tax law can be complicated and is always changing. In order to be sure you are using the provisions of the tax code to your maximum advantage, it is wise to have a quarterly meeting with a CPA to discuss specific situations and get answers to tax questions for your small business. The tax professional will help to keep your tax bill low as well!
About the Author: Brian C. Hill, a licensed CPA and the founder of Professional Tax Resolution, regularly advises small businesses on how to reduce their tax burdens. In addition, his tax settlement firm is known nationwide for ethical and fair tax resolution.