All small businesses have one thing in common; they need to file taxes. But how many times does an owner file taxes without seeing much of a return? There are millions of novice business owners who do not know how to make the IRS work for them. Know your deductions and your exemptions, says one well-known Chicago CPA firm.
It’s important to do the research and know what deductions and exemptions you may qualify for. Experts point out, not to start figuring this out only when it’s time to file taxes. Start in January and plan your year accordingly. This pre-planning will help you set yourself up for a bigger return.
If you use your car for business purposes you an deduct the mileage, parking fee and tolls. Even though it is easier to take the standard deduction, it does not mean it gives you the biggest return. In fact, keeping a good track of the expenses for the car and itemizing them to be exact will give you the greatest return. This includes repairs, insurance, maintenance, and depreciation, based on the business portion used. The same goes if you lease a car; you can claim a portion of the leasing cost.
Equipment, Furniture, and Supplies
Accountants advise not to go out and buy equipment or furniture just so you can get a tax deduction. That’s really poor business sense. However, if you need supplies, or say a new fax machine, then go ahead, then claim the deduction.
Startup Business Expenses
It takes a lot to launch a business. That can mean significant expenses on your part. If you have any professional or legal expenses associated with the startup you will want to deduct those expenses over a 60-month period. You will also want to deduct the expenses from your startup during the first year. If you don’t, then the deductions would be non-deductible until you sell your business.
This is probably one of the most consistent expenses most business owners utilize. You can deduct a home office from your business taxes. Keep in mind there are some requirements. The room you use must be strictly for your home office. That means it cannot act as a toy room, spare bedroom or anything else outside of the business. This also allows you to deduct a portion of rent, utilities, insurance, taxes, professional cleaning, depreciation and interest.
All advertising costs are fully deductible. You can also deduct consultations with professionals about advertising for your business. But like everything else with your business, keep all your receipts for your bookkeeping.
Employing Your Spouse or Child
As a business owner with employees, you can deduct the salaries of your employees. This includes your spouse or child. However, they still need to meet the same requirements as any other regular employee. And just saying your family members are employees does not qualify you for a deduction. They need to meet certain conditions, like paying them a real salary, and it must be the same as you would pay a regular employee; the spouse or child must also do the work necessary for the business.
Keeping good records is an essential part of our business. However, if you want to ensure that there will not be problems with IRS officials, you may want to hire a professional. They not only can help with every deduction available, but also help with tax laws.