5 Tax Tips for Small Business Owners

Jeez, is it really tax season again already? If you own a small business and your palms are starting to sweat at the thought of filing this year, dry them off and know that there are plenty of ways to make tax season relatively painless. We’ve got a handful of tips to save you some money and grant you peace of mind as you enter the new fiscal year. Don’t forget the golden tax rule: treat your tax filing process the way you want your tax return to treat you. Be thorough, leave no stone unturned, no loophole un-researched, and you should be just fine.

Don’t Reinvent the Wheel

Tax software is popular for a reason: it’s tried and true. Sites like TurboTax, TaxSlayer, and H&R Block are fan favorites because the programming is strong and informative, and the security is top-notch. You can have confidence in your filing, even if you have no personal tax expertise. On the other hand, even if you are a total tax expert, using filing software for your small business can still save you in time, effort, and money. Even just the cataloging and organization of your information is valuable enough to invest in these services so you always have an organized record of your taxes.

Keep Strong Records

Hopefully this goes without saying, but it’s critical to have an efficient system for your receipts and records. Even just the time you will save without having to tear up your office looking for documents is reason enough, but the benefits extend much, much farther than that. Practicing good record-keeping will guarantee that you capitalize on all the deductions you’re entitled to, like goods and services that you paid for over the year. As long as it was a business expense, and you have the receipt, you’re pretty much in the clear. If keeping a million slips of paper is too daunting, there are a handful of pretty great apps and programs that can help you keep track of all your purchases—or you could hire an accountant to help you out.

Cover Your Bases

The scariest thing for small business owners is the idea of accidentally getting in trouble with the IRS. There aren’t a ton of bear traps, but one of them is form 8300. This form must be filled out for any and every cash transaction of $10,000 or more. It’s just to keep you safe, and make sure all large cash transactions are documented so there’s no room for funny business. Just make sure it gets done, and hire help if you feel overwhelmed or need some extra guidance.

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Deduct with Confidence

Yes, you can claim your home office (including internet, repairs, and mortgage interest) and car (including gas, mileage, and insurance) as a business expense. The only math involved is figuring out what percentage of your home and your car you are using for work. However, tax software will compute that for you anyway. Whether you’re a homeowner or a renter, a tax pro or a tax newbie, use your car a ton for work or hardly ever for work, the details add up. And when you own a business, even the smallest amounts of money you can save really help you continue your entrepreneurial endeavor.  

Out With the Old

In the moment, you might think that selling your old business equipment is the better decision rather than simply getting rid of it yourself. However, an ordinary loss is fully deductible, while a capital loss is not. So really, looking at the year as a whole, you’re better off ditching the old equipment as advised under Section 1231 in order to classify it as an ordinary loss. Getting over the temptation of instant gratification is a constant challenge as a small business owner, but as usual, the pros outweigh the cons.

Okay, see? Not that hard, not that stressful. The trick is to get started as soon as you possibly can. If you didn’t have an organized system before, it’s time to get those records and receipts all tracked down. Do all your homework on the sorts of exemptions and deductions you’re qualified for, and the forms you’ll need to complete. Make sure everything is squeaky clean, and you’ll be flying right through tax season before you know it.

 

Melissa Thompson writes about a wide range of topics, revealing interesting things we didn’t know before. She is a freelance USA Today producer, and a Technorati contributor.