Helpful Tax Tips for Small Businesses
Complying with your tax obligations is not simply a matter of paying it when it comes due. You have to deal with record-keeping every business day and prepare a summary of your transactions so that you can determine how much tax you owe to government.
Would you like to know some tips so that this process will become easier?
Paying taxes is a major concern for businesses, including small ones operated as sole proprietorships. There are records to keep, files to fill up and submit, and deadlines to meet, not to mention all the tax-related legalities that one has to be familiar with. Meeting tax obligations is crucial for any business as non-fulfillment of this could have legal implications that are both costly and damaging. So how do you go about this part of running a business?
Maximize Tax Deductions
Be aware of the items that you are allowed to take off from your revenues so that you reduce your taxable income. The most obvious ones, of course, are business-related expenses like salaries, rent, electric, phone, travel costs, and retirement contributions. Key to this is keeping excellent records of every transaction made so that nothing that should have been deductible is left out when you prepare your books.
Other possible deductions would be donations to charitable institutions. If yours is a sole proprietorship, partnership, an LLC, or S corporation, you could “pass through” contributions to the business and deduct them on your individual tax return. But make sure that the donation and the amount are qualified to be taken as deductions, and you got a receipt for it.
Also, you may hire family members to work for you to save on federal unemployment taxes, and avoid having to withhold income taxes and Social Security tax. Hiring independent contractors is another way to avoid paying employer’s share of Social Security and Medicare taxes; but be sure you are correctly labeling someone as an independent contractor and not an employee. You would have obligations to fulfill if the person is actually an employee and not an independent contractor.
Keep Excellent Records
This tip could not be emphasized enough. Ask for receipts, and keep and record of all business-related expenses to maximize your possible deductions. In addition, be conscientious in keeping records of the details of the transaction, particularly for those expenses that could be confused as personally-related, like travel expenses. Also, when doing both leisure and business together, make sure to keep separate tabs for each kind of expenses. This record keeping not only applies to expenses but also to income, debts, and deductions.
Comply with the Law
Dealing with authorities for some non-compliance is not only costly, but also complicated, tiring, uncomfortable and disruptive to the business. Naturally, you would like to avoid having to face such situation. Before it happens, what you can do is comply with the law as best as you can – keep good records, and file tax documents on time and properly.
Pay quarterly estimated tax as they become necessary. Keep track of the deadlines for filing, and fill up tax forms completely and accurately. These practices could lower down the probability of tax audits by the IRS. And if indeed you would be subject to an audit, good records could give a positive impression about how you manage your business and bolster your integrity. To be sure, hire a professional who is adept at dealing with all these matters. For an list of online tax and accounting resources, see www.taxsites.com.
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