Uncle Sam will shake you down if your not following these tax tips for your small business returns!
With all the talk about Wall Street vs. Main Street in our country’s economy, and the fact that so many small businesses are struggling to keep their doors (real or virtual) open, it’s more important than ever to take advantage of every possible tax break, credit, and deduction.
The following tax tips are geared towards small businesses set up as either a sole proprietorship, partnerships (mainly husband/wife or family business), and LLCs. The information is intended to help small business owners utilize every possible form of help on taxes as possible, realize a larger profit, and to help them achieve their goals toward being living proof of the economic principles this country was built on.
1. Take advantage of the IRS website (www.irs.gov). It offers free publications for small business owners. These publications clearly outline what forms you are responsible for filing with the IRS, as well as detailed instructions on how to do so. Their website also allows you to fill out the forms, save them on your computer, and print them for filing.
2. The Social Security Administration website (www.ssa.gov) also offers free services for small business owners. The SSA site requires you to register a user id and password with them to print and download your W2’s and W3 transmittal forms from your desk top or lap top. This is especially nice for small businesses with just a few employees. The system prints off enough copies of the W2s for federal, state, local, employee and employer’s records, as well as a copy of the W3. It’s quick, easy, they give you a confirmation letter to print off for your records, and you don’t have the expense and hassle of trying to type or print W2s.
3. Another free service to small business owners is the Electronic Federal Tax Payment System-EFTPS. Their website, www.eftps.gov allows you to fill out and pay your income and quarterly 941 taxes on line within a matter of just minutes. You do have to mail the hard copy of the 941 you fill out, but it’s still a very easy process.
4. If the mantra for real estate is location, location, location, the mantra for a small business in regards to taxes is receipts, receipts, receipts. Most businesses require a receipt to be presented in order for a refund to be issued. The IRS requires receipts for proof of the deductions you claim. It’s always better to have a receipt you don’t need than to not have one you do.
5. Speaking of deductions…while the IRS does provide relatively clear guidelines as to what is considered an allowable deduction, there are some gray areas small business owners are always afraid to wade in to. For instance, you may deduct the cost of a trip if you spend at least 50% of your time doing something related to your business. The key here is the ‘something’; checking out what similar businesses do, shopping for materials and supplies, attending a seminar, etc… Other deductions often missed include charitable contributions made by your business-including donations of goods, services, and your time.
6. With the economy being the way it is, you would be wise to hold off on purchasing assets you plan to depreciate out over the next 5 or more years. The reason: if you do end up having to close up shop, you will have to recapture a portion (usually sizeable) of the depreciation you have claimed on tax form 4562. You might end up paying considerably higher taxes than you would if you hold on to your older vehicles and equipment that has been or is close to being depreciated out. You can fill out a Schedule D from the IRS website to see how you would come out before making any decisions you might live to regret.
7. Ignore all the ads you hear about E-filing. Most of these sites don’t have all the forms you need anyway, and none of them are equipped to handle the ‘what if’s’ and extenuating circumstances that often come with a small business.
8. If yours is a family owned farm or business, take the time and spend the money to attend seminars and/or seek expert counsel on how to turn your business over to the next generation. There are several websites you can go to for answering questions or finding out where to go for help.
9. Don’t forget that some of the tax credits available to individuals in the way of energy saving appliances and maintenance can be used on the business level as well. Combing those credits with the savings in monthly utilities adds up nicely.
10. Honesty. Honesty is always the best policy.
Are you taking advantage of the proper tax tips for your small business?
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