Even if you don’t own a business of impressive size, it does not mellow down your tax situation. Owning a small business means that you often have to wear too many hats at the same time. One of them is to take care of your taxes. It may be quite tiring but taxes are important and you have to comply with the law. Here are some tips you can use to ease your burden:
1. As a business owner, you may be working with vendors and external contractors. You need to identify those who you pay more than $600 over the entire year. This is helpful so you can send them the 1099 Misc forms.
2. You may be able to reduce your tax burdens if you adopt employee benefits as health and child care instead of providing income raise.
3. You can earn tax deductions from the IRS. If you have any unsold or unused inventory, don’t invest on storing it. Instead, donate it to earn the deduction. However, be careful as donations worth more than $500 have detailed reporting rules.
4. One of the biggest mistakes small business owners do is overlapping their personal and business accounts. If you keep them separate, it means you have separate accounts and credit cards. This reduces complication in calculating the taxes.
5. Try deduction education expenses that are incurred from employment improvement. For example, fee or investments you make for seminars, training, classes and conventions.
6. Business owners are often faced with the choice of selecting actual auto expenses or mileage expenses when calculating the taxes. The better option is the mileage expense, given the rising gas prices. You can use apps like Outright that are easy and helpful for keeping track of your mileage as you go.
7. Small business owners have the benefit of hiring their kids or spouses as an employee. If you pay a kid up to $6000 from the profit you make, the IRS is not going to tax that amount like your ordinary income is. You can hire your spouse as well and pay for the healthcare of their family, which is technically you, and deduct that amount. This way you can reasonably save on taxes for the next year.
8. The amount you spend on launching your business is known as a capital expense. You can deduct up to $5000 from your first year of business.
9. Another helpful aspect for small business owners is the Small Business Jobs Act Tax. This law came into implantation in 2010. This law greatly supports small business owners by aiming almost 20 initiatives at lessening the tax burden for them. as a result, it helps with savings for small businesses.
These tips were taken from James Bsales at Small Business Computing.
It is highly suggested to keep track of your tax calculations to avoid complications from the IRS. Some calculations like tax deferred can be complicated but a little help and time make it easy to stay ahead