Tax Season: Small Business Tips to Minimize Taxes

Tax Season: Small Business Tips to Minimize Taxes

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There are millions of small businesses in America, and — thankfully— there are more of them popping up all the time. In many ways, America’s small businesses are wildly different from one another, but they do have one thing in common: The need to pay taxes. 

As it so happens, tax season is right around the corner — and already, some small-business owners are dreading the bills they’re about to be saddled with. Rather than dread the tax season, however, small-business owners can start working now, being proactive as they seek to minimize their tax burdens. 

Taking stock

Hopefully, you haven’t waited until the last minute to begin preparation, if only in the form of recordkeeping. The best way to minimize tax burdens — while avoiding red flags for the IRS — is to keep records of expenses and of legitimate deductions. Keeping a running tally of these deductions helps business owners ensure that they are keeping records, and also that they remember all of their deductions once tax time comes around. 

If this isn’t something you’re in the habit of doing, you may now need to play some catch-up — but at least you’ll be ready to get a jump start on next year’s taxes. 

Taking deductions

Speaking of deductions: Make sure you’re taking them, all of them that you can. This may seem like simple and intuitive advice, yet it is remarkable how many small-business owners fail to take all of the deductions they are allowed. 

Some of the categories of potential deductions include travel, meals, home office, and health insurance costs. While these can all be legitimate deductions, you will want to round up your receipts and other supporting documents to authenticate them. 

Also note that if you purchased or upgraded business-related equipment in the past year — and spent less than $2 million doing so — you can deduct up to $5,000 in equipment costs. The cost of repairs may also be deductible. 

Take caution

You want to take all of your deductibles, so long as they are legitimate. What you don’t want to do is raise any red flags for the IRS; even if you haven’t done anything wrong, you might still get audited, which is burdensome to say the least. 

Start by noting that if your business has not made a profit in the last three to five years, the IRS technically considers it your hobby. The implication of this is that your deductions cannot exceed the gross receipts for the activity. 

Also, taking a home office deduction is often a red flag. You should not take this deduction unless you actually use the home office exclusively for business. 

Take credits

A final tip for small business owners seeking to minimize their tax burdens is to take whatever special tax credits are due. There are many examples, including tax credits for anyone who hired a qualified, unemployed veteran last year. Small business health care tax credits are also available; to learn more about any of these, the best approach is to run it by your CPA.

Of course, this is good general advice. Small-business owners can and should work hard to minimize their tax burdens, but it’s just as important to keep yourself safe from legal peril or potential audits. Consulting with an accountant, all while keeping good, reliable records, can help you walk this thinnest of lines. 

About the Author

Amanda E. Clark is the president and editor-in-chief of Grammar Chic Inc., a full-service professional writing company. She is a published ghostwriter and editor, and currently under contract with literary agencies in Malibu, Calif., and Dublin, Ireland.

Since founding Grammar Chic in 2008, Clark, along with her team of skilled professional writers, has offered expertise to clients in the creative, business and academic fields. The company accepts a wide range of projects and often engages in content and social media marketing, drafts resumes, press releases, Web content, marketing materials and ghostwritten creative pieces. Contact Clark at www.grammarchic.net.



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