Being your own boss is the American Dream. It gives you the freedom to determine where and when you want to work, as well as the type of jobs you want to take and the clients you want to work with. Being your own boss, unfortunately, does come with its own headaches – especially when it come to dealing with taxes. Here are a few tips for make dealing with the IRS much more tolerable. Check out our top 5 tax filing tips
5 Tax Tips for Small Business Owners
1. Know What Tax Deductions Are Available to You
There are a lot of myths out there regarding tax deductions. While it’s true that as a business owner you do have a legal right to deduct many of your business expenses it’s important to deduct only what the tax code allows. Here are a few examples of common deductions. As always, consult with a tax professional before making any deductions on your tax returns to avoid problems in the future:
· Advertising and marketing costs – the cost to promote your business is deductible. This includes radio and TV ads, printed brochures, business cards, and other related promotional materials.
· Auto expenses – For vehicles you use solely for business purposes, you may deduct 100% of their operating costs. If the vehicle is used for personal and business use, you can only deduct the business usage costs.
· Startup expenses – As a new business owner, you may deduction up to $10,000 in costs related to creating, launching, and organizing your business.
· Travel expenses – you can write-off most travel expenses for yourself and your employees when traveling for business purposes. This may include, but is not limited to transportation costs, tolls, lodging, and meals.
2. Choose an Accounting Method
Another important decision you must make as a business owner is which accounting method to use. The two main options are:
· Cash – The cash method is the most common one used by small business owners. Under this system, income is counted in the tax year you received it and expenses are included in the tax year you paid them.
· Accrual – Under the accrual method, income is counted when it’s earned (not collected) and your expenses are included as they are incurred (not paid).
Many new business owners choose to use the accrual method since they may have unpaid expenses that exceed any uncollected income. Before you decide, however, we strongly recommend speaking with an experienced accounting or tax professional to determine which is best for you.
3. Keep Personal & Business Expenses Separate
One of the easiest ways to get in trouble with the IRS is to mix your personal and business expenses. Comingling of funds is a big no-no. It not only increases your chances of being audited, but also puts your personal assets at risk. Use a separate bank account and credit card for business purposes so that it’s easy to see what you spent money of for your business and what was a personal expense. This will help keep you from being red flagged by the IRS.
4. Work With a Reputable Payroll Company
It’s a good idea to hire a payroll company to help you with processing checks and submitting payroll taxes. Just be sure you pick one with a good reputation. Hiring a less-than-stellar service could lead to tax trouble. As the business owner, you’ll be on the hook for any late or unpaid payroll taxes regardless of who is in charge of sending them to the IRS. Payroll companies can help you calculate payroll deposits and ensure your employees are paid properly.
5. Hire a Tax Professional
You’re a business owner so that probably means you’re pretty smart. In all likelihood you can hop on the internet, watch a few Youtube Video’s and figure out how to prepare your taxes. Is that a good use of your time? Wouldn’t you rather spend that time drumming up new business? Or spending that time with your family?
A solid tax professional will save you time, money and heartache in the long run. Make a call to Lifeline Tax Solutions. We’ll chat about your business to see tax strategy is best for you and your business. 800-767-1019