Business Taxes: Everything You Need to Know
Taxes. Filing taxes for yourself can be complicated, but when filing taxes for your business, the
complexities can multiply. To make tax season hassle-free this year, you need to understand the regulations and deadlines. Here are five tips to avoid audits, claim more deductions and reduce overall tax headaches:
1. Record Everything
The healthiest thing you can do for your business is to keep your books up-to-date, clean and accurate. Be sure to keep all of your receipts and preserve other important business documents. That way, you’ll not only be organized, you’ll be prepared in the case of any audits and be better equipped with the right files when claiming business expenses. If you use a bookkeeper make sure you’re they’re using the right cloud applications on your behalf – so your data is always accessible. That way you can breathe easy during tax season knowing that you are covered.
2. Don’t Mix Business with Pleasure
It’s best to have a completely separate bank account and/or credit card for your business. The IRS does not take false claims lightly. By keeping your business and personal expenses separate, you can clearly define what purchases and payments fall into each category. Also,
having two different banking systems for your personal and business expenses can help with budgeting.
3. Know What You Can Deduct
Once you’re aware of what business expenditures can qualify as deductions, you can start planning for claims early on. Here are some common categories for tax deductions:
- Startup Costs – the costs of getting your business off the ground are considered capital
expenses. You can deduct up to $5,000 in your first year of business.
- Relevant Education – If you’re taking classes or enrolling in education programs to
further your skills for your business, you can deduct those expenses. These costs can
include courses, seminars or even trade shows.
- Travel costs – This one’s multi-faceted. You can deduct company car and truck expenses, commuting costs to and from the office and travel costs for business-related trips.
- Working From Home – A home office comes with many perks (if you’re a Schedule C filer.) One benefit is being eligible for home-office deductions. There must be a designated space within your home that is exclusively used for business purposes, and you may also be able to deduct costs for rent, utilities, internet connections and even some repairs.
- Self-employed Health Insurance – Contract workers, freelancers and self-employed individuals benefit from one of the most significant deductions you can take advantage of as a small business owner. You may be able to deduct premiums on qualified medical, and dental insurance plans for yourself as well as your spouse and any dependents under the age of 27.
See also: 3 Ways to Save on Small Business Taxes
4. File Electronically
Small business taxpayers earning $64,000 or less (in 2016 Adjusted Gross Income) can use free tax software and e-file their taxes. Tax software automatically completes forms from information you input through a series of questions you answer. This option simplifies the entire process for eligible taxpayers. Please note, this only applies to small business owners filing a form 1040, which means you are a single-member LLC and report business earnings using Schedule C. This option is not available to all tax filers.
5. Know Your Dates
The easiest way to stay on top of all things taxes is by being cognizant of key tax dates and deadlines. You can plan ahead, avoid penalties and set your business up for success.
This post was originally published on the StreetShares blog. Copyright © 2017 StreetShares, Inc. All Rights Reserved.
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