Tax Tips for Small Businesses

Small business taxes are their own unique animal. Even if you’ve worked in bookkeeping at larger companies, they can be bewildering, because the rules for taxing and reporting taxes for small businesses tend to be very different from larger ones. A big part of this is due to company structure. Large companies are far more likely to be structured as corporations, which enjoy their own tax structure and opportunities to streamline the tax burden. Companies held by a sole proprietor or partnership that do not become full corporations have tax obligations that are different from both wage employees and corporations, and most of those companies are small ones.

If you’re paying taxes for your business on Schedule C of your income tax, you’re in this category, and there are a few things you should know about making the most of your tax situation. For starters, you have a lot more options for writing down vehicle expenses than someone who is simply using a car a few times for business trips. If documented correctly, you can proportionally write off vehicle expenses according to the amount of time and miles the small business uses. You can also opt to take the federal mileage rate, but it’s one or the other. It’s worth tracking both to make a good tax choice each year.

Startup expenses are often far more than the first year’s tax obligation, and paying them down often involves long-term debt. Luckily, you can write down up to $5,000 of starting expenses and an equal amount for organizational expenses during your first year. Those savings can make a big difference, as can a proper home office deduction. The IRS allows for a flat rate deduction, but if your business is your livelihood and not a part-time operation, you’ll probably get more out of itemizing all the expenses and making sure you get all your deductions and write-offs.

Last of all, remember that your health insurance costs are considered a cost of doing business as a business owner, and you can count them as business expenses because they are benefits for your worker, you. Don’t miss that opportunity, especially with the way healthcare costs have been escalating over the past two decades. Larger companies deduct their employee benefits as a cost, and you’re entitled to the same consideration as any other entrepreneur or business owner. There are a lot more ways to fine-tune your taxes according to your personal circumstances and industry, so keep doing your research to get your best savings.


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