Tax tips for small business owners
As a small business owner, there are a lot of different challenges that you must undertake.What many people do not initially consider are the tax costs of running a business.There is a lot of money that you may have to pay come April unless you are smart about your tax planning throughout the year.Here are some simple tips that any small business owner can follow to help you to save money.
1. Get the most out of your deductions
Most small business owners are using at least a portion of their personal income to sustain their business.All of the money that you use for necessary business expenses can be deducted from your personal income taxes.Some of the most common business expenses are equipment and rent.However, there are many more costs that could be considered business expenses and therefore can be deducted from your income taxes.For example, if you go on a business trip, the costs of that trip (transportation, business lunches, etc.) qualify as deductions.In fact, no matter where you go, if you spend more than 50% of your time doing business, the transportation costs can be a deducted.Each business owner is likely to have unique spending habits which translate into specific deductions, so it is best to check with your accountant or tax preparer to make sure that you are getting the most from your deductions.
2. Take advantage of tax credits
Tax credits come in many different forms.With the current economic situation, the government has issued even more tax credits.These credits are designed to reduce your tax liability and can include Employer Social Security Credit, Disabled Access Credit, Work Opportunity Credit, Research Credit, Investment Credit, and more.Again, it is always a good idea to double check with your accountant to make sure that you have taken advantage of any credits that are available.
3. Quarterly estimated tax
Did you know that in some situations not paying your taxes quarterly could mean receiving a fine?It's true, according to the IRS, if your business has a tax bill of more than $500, you should be paying quarterly estimated taxes.If you do not pay your quarterly estimated tax, you could be charged a penalty.
4. Charitable contributions
Giving to others can be of a benefit to you financially when you claim your charitable contributions as deductions.When it comes time for taxes, it pays to give to charities, churches, or other non-profit organizations.
5. Don't be late
If you want to avoid being hit with late fees, make sure that you meet all the necessary tax deadlines.Here is the breakdown:
Annual returns are due on April 15 (for unincorporated companies and S corporations).Most small businesses fall into this category.C corporations must file within 2 ½ months from the end of their fiscal year. Estimated taxes are to be paid quarterly (meaning that they are due 4 times a year) on Jan. 15th, April 15th, June 15th and Sept. 15th.Sales tax is due quarterly or monthly, depending on what state your business is located in.Ask your accountant if you are unsure of how sales tax is to be paid in your state.If you have employees on a payroll, employee taxes are due either weekly, monthly or quarterly.
6. Keep good records
You should keep all of your tax information for at least 7 years.If you are audited, you can save yourself a lot of trouble and costly fees if you can account for all of your numbers.It is also to your benefit to make sure that your accounting system is up to date and accurate.If you are able to stay on top of your finances, tax time is not something to fear.