Preparing for tax time is a year-long, ongoing process that can seem overwhelming to many small business owners. Instead of fretting, focus on looking for ways to maximize your tax benefits with these five tax tips every small business owner should know.
Keep Accurate Records
Keeping accurate records of your business’ income and expenses is one of the most important things a small business owner can do to help make things easier at tax time. Keep receipts for all deductible expenses, payroll records, insurance premium records, operating expenses like rent, utilities and more. Scanning receipts and using software programs like Excel Spreadsheets and QuickBooks can help you keep records organized and the “paper mountain” smaller. Going digital is also great for the environment. Just make sure you back up your data on a portable hard drive, flash drive or CD to avoid catastrophic loss in the event of a system failure or crash.
Tap into Tax Deductions
Tax deductions help reduce amount of taxes owed and help maximize any refund you may be entitled to. Six commonly overlooked deductions include:
- Home office deduction – If you have a dedicated space in your home being used as a home office for your business, you can deduct expenses for that space. You can calculate square footage as a percent of the total square footage of your home, then deduct percentages of utilities, deductible mortgage interest, property taxes, home owner’s insurance and more. See IRS standard home office deduction information here.
- Car expenses, such as mileage and gas used for business purposes, and other auto expenses including insurance, registration fees, repairs, maintenance and more if your car is used for business.
- Insurance premiums – Per the IRS, medical, dental or long-term care insurance premiums that self-employed people often pay for themselves, their spouse and their dependents.
- Advertising and business promotion expenses
- Office supplies – Printer ink, paper, computers and other pieces of office equipment, pens, paper, etc.
- Professional subscriptions, Publications, Qualifying Courses – Any professional subscription services, trade journals and publications, or continuing education courses, training, and certifications you need to acquire, maintain, or renew to run your business are included.
Cash in on Tax Credits
Taking advantage of the appropriate tax credits can also help reduce your tax liability. There are several tax credits out there for small business owners including the Small Business Health Care Tax Credit. There are several qualifiers, including having fewer than 25 full-time equivalent employees. You can visit Healthcare.gov to find out if your business qualifies for this credit. The IRS gives an extensive list of Business Tax Credits here.
Don’t Forget to Donate
Donating can help declutter your business of overstock, unused, or unwanted equipment and products. Keep receipts for any qualifying charitable donations you make via your small business, as well as any used equipment, unsold inventory, money, supplies and property.
File on Time to Avoid Penalties
Filing past the tax deadline can result in costly fees and potential penalties and interest on any unpaid tax balance that is due at the filing deadline. To avoid this costly mistake, make sure you file by the IRS deadline and pay your full tax due. If you don’t have the money to pay your tax bill, at least file the return to avoid a late file penalty and contact the IRS to make payment arrangements for the balance.
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For more tips and inspiration for small business owners,
visit CBS Small Business Pulse Los Angeles.