If you're serious about making money, then you never say no to small business tax tips. Knowing how to keep up with taxes for small business owners is some of the best tips you'll ever find. This tax checklist for small business owners might be the difference between high-profit margins and barely scraping by in this competitive economy.
1. Define the Right Classification for Your Business
Know your structure. If need be, reclassify to one that is most advantageous to your small business. Tax saving tips for LLC entities might be different from other tax structures. Small businesses can be many different things, including but not limited to S-corporation, partnerships, and sole-proprietorships.
Businesses such as these are considered pass-through entities where owners pay personal income taxes on profits. Still, there are also C-corporation structures that might permit more deductions so you keep more of your money. An accountant can look at your entity's tax structure and help you figure out what would work best for your small business.
2. Keep Accurate Records of Revenues and Expenses
There are many tax tips for small businesses, but there's one that will spare you an annual headache if you practice it weekly. That is keeping up with your receipts and expenses. Some small businesses do it daily, even, instead of weekly.
Whatever pace you choose, it will keep you from having to play catch-up with a year's worth of paperwork when tax time hits. Using an app or software will help you automate this task, which doesn't just increase accuracy but also saves you time and energy for more important things.
3. Deduct Section 179 Property
Certain kinds of business property might be something you write off a little each year as it depreciates, but Section 179 property can be deducted for 100% of its value in the same year you start using it. You can do this up to $1,000,000 in total value in a given tax year.
Potentially eligible categories include off-the-shelf computer software, business and research facilities, office furniture, livestock building, pizza ovens, and property used for production, transportation, and manufacturing. Timing your purchases for a certain tax year and using the physical property
4. Use Accounting Software
Doing your taxes and record-keeping the paper is dangerous for accuracy and always carries the risk of losing things. Even doing things by spreadsheet still involves the possibility of mistakes. The IRS says that less than 1 in 100 online tax returns have issues, but it's over 1 in 5 for paper returns.
In short, tax and accounting software are a must for any small business. Fortunately, the tax specialists at Lewis CPA can import your data from a variety of software options and still do your taxes. Not taking advantage of modern technology is a surefire way of holding your small business back.
5. Deduct Your Home Office
Many filers who could take advantage of it are too worried about the home office deduction to take it because they worry about the IRS landing on them hard. However, it's too potent to pass up if you qualify.
The simplified method can save you $5 per square foot to as much as 300 sq. ft. The regular method involves a bit more math, as you have to add up business-related expenses for any part of your home that is used principally for business purposes.
6. Deduct Stock Contributions
Charitable donations aren't just tax deductions for people filing their taxes. Small business owners can also do this. Charitable stock donations happen when you donate various appreciated assets. These can include stocks, bonds, and mutual funds.
These donations let you skip the capital gains tax and save 20%. You also get to deduct a stock's full market share from your income taxes on top of that. This 1-2 tax-saving punch is a smart one to take advantage of.
7. Deduct Appreciable Stock Contributions
Small business owners and self-employed professionals get more retirement options and potential tax benefits than most other citizens. Your options include 401(k) plans, profit-sharing, and many IRA possibilities. Small business owners might be able to deduct up to $5,500 a year for retirement if they're under the age of 50 and $6,500 a year after their 50th birthday.
Turn to a reputable accountant to find out your personal eligibility and limits and then set up the right accounts to benefit from all of this. Even small business owners who might qualify for Social Security in retirement can't expect to live off of it, so finding a healthy retirement portfolio is always a savvy move that helps you take care of yourself in the long run.
8. Use Bonus Depreciation
If you remember any of these tax tips for small business owners, let it be this one. Business depreciation enables you to deduct up to 100% of the costs involved with specific business property. This includes but isn't limited to appliances, equipment, machinery, and computer software.
Businesses can write off the full amount of eligible assets until the start of 2023. However, you shouldn't get this confused with Section 179. The right tax accountant can help you discern the difference between the two so your small business benefits the most. A great accountant doesn't just do your taxes but also makes sure you benefit from as many breaks and deductions as possible so you keep the most of the money your small business makes.
9. Involve Family Members In Your Business
Hiring family members has many advantages, including teaching your kids the value of money or getting them ready to take the business over in the future. However, there are also tax benefits.
Depending on how your small business is structured, and if your spouse is involved, you might be able to do anything from writing off the salary for family members to even avoiding taxes per the Federal Unemployment Tax Act and Federal Income Contributions Act. If your kids are in lower tax brackets, that might even lower tax obligations for the entire family while you're at it!
Businesses are also much more likely to survive disruptions when multiple family members are involved in case you ever become unavailable for a period of time.
10. Hire the Right Accountant
Perhaps the greatest of all tips for filing taxes for small business owners is to get the right accountant. You need someone skilled and certified to handle this serious matter properly to ensure your company's taxes are done correctly.
The right accountant can lead you through a stress-free tax season, whereas the wrong one can wind up with you facing an IRS audit. Also, if you wind up getting audited, would you really trust the accountant that might have gotten you involved with one? If you want to use the services of someone who knows everything there is about small business taxes, then contact us right away.
Conclusion
Small business tax filing tips help you know how to file taxes for small business LLC structures. When the time comes to file taxes, small business structures of all kinds need to make sure they get their returns prepared correctly and on time to avoid penalties related to failure to file, failure to pay, and potentially underpaying or even overpaying the taxes that they have due. When you want things done right or just done for you, turn to small business accounting experts.
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