Let’s face it, taxes are no fun for anyone. Especially when you are an entrepreneur trying to maintain a steady business. When this is occurring, it’s easy to focus on the negatives. It also makes you realize how much is coming out of your wallet and paycheck. This makes it simple to forget that there are still benefits to being an entrepreneur, especially when it comes to certain tax deductibles you could be receiving.
How Taxes Affect Entrepreneurs
You’ve worked hard to become an entrepreneur. A lot of financial risks were taken, difficult goals were set, but you’ve finally built the business of your dreams. One of the biggest financial burdens involved in this process is taxes. There are certain ways that taxes could be making a bigger impact on you and your business than you may expect.
High Tax Rates
There are specific companies and businesses who receive direct benefits from taxes, such as companies working for the government or businesses in the medical profession. Specific taxes to look out for as an individual entrepreneur are payroll taxes, personal income taxes and capital gains tax. This mostly affects individual entrepreneurs with capital that isn’t very expendable.
More capital is taken from you and your business, as a result of the high tax rate, as this goes straight to the government. This often causes entrepreneurs to avoid building a small business, in the fear that these high tax rates will harshly affect their new business. This fear of sudden failure keeps future entrepreneurs from working to pursue their dreams of a new business.
Paperwork, Paperwork and more Paperwork
As an entrepreneur, it’s practically fate that you’ll end up stuck with not only a lot of taxes to pay but also a lot of paperwork to deal with. Different types of paperwork that you will most likely be tackling are employee W2’s and members of partnership’s K-1 form.
Self-employment incomes also require Schedule C as well as Schedule SE for Social Security and Medicare taxes. You’ll also need to locate 1099s for any contractors or investors and gather receipts that were ever used for business purposes. Don’t forget that sales tax on any goods your business will sell also requires documentation for tax purposes as well.
3 Tax Benefits you’re Forgetting as an Entrepreneur:
Since the above points clearly state a negative financial impact on you and your business, it’s easy to assume there aren’t any benefits to you or your company when it comes to taxes. This is untrue, as there are still a few benefits that although significant, still seem to be overlooked.
1. Education is Tax Deductible
If you are itching to take courses relating to your line of work or business you own, you are eligible to take classes and they will, in turn, be tax deductible. As long as you can clearly verify and confirm that these courses are related and/or beneficial to your current business. Be sure that you are able to provide evident proof that the new information you’ve learned will directly enhance your business.
2. Self Employment at Home Write Off
It’s not easy comparing with bigger, corporate companies when trying to start your small business. As a result of this, you are able to write off £5,000 of your startup costs in your business’s first year. Your remaining start-up costs are deducted throughout the next 15 years. If this business is ran from your home, these costs can possibly be deducted as well.
Possible costs could include anything related to your home office area, mortgage, insurance, utilities, and/or car expenses if your vehicle is needed to complete certain aspects of your business. As long as you make sure to clearly differentiate your work and home, you shouldn’t have problems writing these expenses off.
3. Travel Expenses Are Also Covered
Does your business have you traveling a lot? This can also be deducted. Any business-related traveling can also be deducted from your taxes.
If you are traveling for a convention, class, etc. your plane ticket, hotel, and any other expenses can be written off, as long as you can easily prove that the trip was taken to enhance your business. Sometimes it can be tricky and difficult to tell what can and can’t be written off on trips such as this, so using tools like QuickRebates can help you clearly define what can and can’t be deductible.
Taxes aren’t always easy or simple. Not only can they sometimes put a dent in your wallet, but they also take a lot of time to determine what types of expenses can be deemed as deductible. Be sure to stay organized and constantly track your expenses. Having everything organized and ready to be audited is the best way to maintain a strong and financially stable business.