Small business owners are among the most frequently audited taxpayers in the country. While the IRS allows them to claim a large variety of business deductions, such as the home office tax deduction, there are also several possible pitfalls in the tax code for entrepreneurs.
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To avoid making a costly tax error, it’s important that business owners get to know which tax laws apply to them and how they can lessen their self-employment income tax and tax liability. Here’s a simple tax guide for small business owners. Taxes
FAMILIARIZE YOURSELF WITH AVAILABLE DEDUCTIONS
Before beginning business for the year, sit down and look at IRS Publication 334 or IRS Schedule C “Profit or Loss From Business” to get a look at all of the allowable business deductions you can claim. These deductions will likely include most, if not all, of your day-to-day operating expenses. Some of the eligible deductable business expenses include advertising, payroll, utilities, office expenses, travel, repairs, supplies, and bookkeeping fees.If you pay for your own health care coverage, you can also deduct this on your annual return.
One of the largest business deductions for many entrepreneurs is depreciation. The IRS allows business owners to use a special kind of depreciation called Section 179 that allows them to completely write off the total cost of a piece of equipment that is placed into service for the business during the tax year. Rather than having to slowly deduct the value of the asset over its “useful life,” which usually covers several years, entrepreneurs can simply deduct the entire cost at once. Assets that cost less than $500,000 are typically eligible for a Section 179 deduction.
KEEPING UP WITH YOUR RECORDS
Now that you know which deductions you can claim, you’ll need to begin keeping records of all these costs from now through the end of the tax year. Set up a simple filing system and categorize your expenses by type. As you incur costs, get receipts and keep them in each appropriate category. If you keep up with your costs regularly, you’ll be able to total your deductions quickly at year’s end. These records will also be valuable if the IRS ever questions the legitimacy of your expenses.
CHOOSING THE RIGHT TAX FORMS FOR YOUR BUSINESS
Another important part of tax planning for small businesses is to complete the proper form for the kind of business you operate. For example, if your business operates as a sole proprietorship, then you can complete a Schedule C or a Schedule C-EZ and simply attach it to your personal Form 1040. However, if your business is structured as a partnership or a limited liability corporation (LLC), then you’ll have to fill out a separate information return for the business alone and then include your part of the earnings in your personal income for the year. An experienced tax professional or accountant can help you complete your tax form correctly.
Operating a small business within the laws of the tax code can be tricky. With a good understanding of how IRS regulations apply to your company, though, you’ll be able to avoid many of the tax problems that entrepreneurs often face.
So, if you have IRS Problems, Owe Taxes, have Past Due UnFiled Tax Returns and need IRS HELP – Take action today! You should work with a nationwide tax relief firm. Call Advance Tax Relief (800) 790-8574
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If you think that you may need help filing your 2017 tax return and past due tax returns, you may want to partner with a reputable tax relief company who can help you get the max refund and reduce your chances for an IRS AUDIT.
Advance Tax Relief is headquartered in Houston, TX with a branch office in Los Angeles, CA. We help many individuals just like you solve a wide variety of IRS and State tax issues, including penalty waivers, wage garnishments, bank levy, tax audit representation, back tax return preparation, small business form 941 tax issues, the IRS Fresh Start Initiative, Offer In Compromise and much more. Our Top Tax Attorneys, Accountants and Tax Experts are standing by ready to help you resolve or settle your IRS back tax problems.
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