Being a small business owner is no easy task, especially when the taxman comes knocking at your door. Whether you just created a startup, or you’ve been operating a small business for decades, filing your business taxes never seems to get easier. From complying with local, state, and federal laws to trying to find every receipt from the past year, preparing your taxes is a chore you’d rather save for another day.
However, if you take a proactive approach and understand the ins and outs of the tax code, dealing with Uncle Sam can be easy and less stressful. Before the April 15th deadline, make sure you know how to get the most from your taxes as a small business owner with these tips.
Take Advantage Of Deductions
Deductions are the single most cost-effective measure small business owners can take this tax season. A tax deduction is a reduction of income that is able to be taxed, commonly due to expenses that are used to produce income.
For example, if your business earned $400,000 in revenue, and you bought an expensive piece of equipment worth $20,000, your taxable income would be $380,000. There are numerous small business tax deductions you can take advantage of this year, including:
● Automobile expenses: Expenses such as gas, insurance, and repairs
● Salaries and wages: The salaries and wages of your employees
● Supplies: Anything you buy for business purposes, such as a lawnmower for a landscape company or a new oven for a bakery
● Depreciation: File Form 4562 to elect Section 179 to deduct the depreciation of equipment
● Rent: Both rent for business property and rent for equipment can also be deducted
● Utilities: Water, electricity, heat, garbage, mobile phone charges, etc.
● Insurance: Flood insurance, cyber liability coverage, malpractice coverage, and business continuation are just some of the types of insurances that are 100 percent deductible. When it comes to health insurance, small businesses can claim a tax credit up to 50 percent for employee health coverage
● Repairs: Any repairs for auto, machine, equipment, tools, technology, etc., used for business purposes
● Travel: Business-related travel expenses, such as for conferences or meetings, can be deducted
● Home Office: If you run a small business from your home, all home office expenses can be deducted, such as a second landline, supplies, furniture, WiFi, mobile phone expenses, and more
Use Tax Software
As a small business owner, you have a lot on your plate. If you run a local plumbing service, the idea of crunching numbers and filing paperwork can send shivers down your spine. With so much to do and so little time, putting everything on the back burner so you can properly file your small business taxes can put your company one step back. While it may be hard to let go of the reigns, outsourcing your taxes to a tax filing software can save your small business both time and money.
A tax filing software will help streamline your taxes, stay organized, and ensure you comply with all state and federal laws, so you don’t get hit with any penalties. Even better, tax software is much cheaper than hiring an accountant or going to a tax preparer in person. With tax software, you’ll be able to keep track of all your information in one place, while not shoveling out money to expensive services.
Stay Organized
Taking the time to stay organized not only during tax season, but throughout the year, will save you time, money, and headaches. The last thing you want is to lose an important document or receipt to prove you have a deduction, resulting in you losing out on some substantial savings. Staying organized by filing all your receipts into a filing cabinet, keeping track of your employee’s hours, and so forth will allow you to accurately complete IRS Form 1040. And if you’re ready to consolidate all of your tax paperwork, consider utilizing cloud software to keep track of your receipts and documents in one place. You can even use online bookkeeping services to itemize your deductions throughout the year, so when it comes time to calculate how much you owe in taxes, all the information will be in one place, right on your computer screen. Consolidating your paperwork will save your small business time this tax season so you can dedicate more effort to your business.
Wrapping Up
We know, running a small business is hard stuff. Hopefully, with these tax tips, you’ll be able to prepare your company for tax season so you can put your focus where it matters most: your job.