I'm getting ready for a summer away from home, and I'm grateful for guest posts. Tax season may be over, but you should still be working to minimize tax obligations for your small or home business.
You've survived tax season. But that doesn't mean it's ok to take your focus off taxes for the moment. In fact, now is the perfect time to take steps to prepare for Tax Time 2017. We all want to save money when it comes to paying our taxes. If you have a small business it is very important to learn and keep track of your expenses, deductions, and other ways of saving on taxes throughout the year. Below are some ideas for minimizing your tax obligations as a small business owner.
Minimize Tax Obligations as a Small Business Owner
You might be surprised at how easy it can be to minimize tax obligations. Here are 10 tips to make it happen:
- Use a computer program to do your record-keeping so you can track your income and expenses. You need to have a procedure to keep and store your receipts and other proof of expenditures. Set up a filing system to categorize everything (car-related expenses, meals and entertainment costs, software and office space fees, capital expenditures, etc.).
- Track your mileage. For instance, if you have a dog boarding or dog walking business, you should be able to deduct the use of your car and gas or take the standard mileage deduction for the current tax year. If you have employees who drive for business purposes, be sure to show them exactly how to keep records for their mileage.
- Deduct travel costs and entertainment expenses. You can even keep the airline miles for personal use.
- Employ a family member. In fact, you can hire one of your children to do odd jobs, pay a fair wage, and then contribute to a ROTH IRA on their behalf, while deducting the cost of their salaries as you would other employees.
- As a small business, you can claim a home office deduction as well as valid business expenses. Some of these expenses include advertising, general supplies, and office equipment.
- You can save money on your healthcare costs. Hopefully, you're healthy now, but medical costs are constantly on the rise. You'll want to save money for any future healthcare needs. You may want to think about using a Health Savings Account (HSA) if you have a high-deductible health plan.
- Set up and contribute to a retirement fund for yourself. You could think about setting up a SIMPLE IRA or a SIMPLE 401K plan.
- You can deduct your business phone costs as a small business owner. If you use your personal cell phone for business use, you are allowed to deduct the portion you used for your business from your cell phone bill.
- Deduct the cost of meals for business purposes. As long as your business lunches or meals aren't lavish or extravagant, you can deduct 50% of meal costs — but only when meals are for legitimate business purposes.
- Possibly the most important strategy to minimize tax obligations is to hire an accountant or other qualified professional. The United States tax code is, to put it mildly, complicated and difficult for laypersons to understand. Trying to prepare your small business taxes on your own could result in errors and ultimately lead to an IRS audit, something no small business owner ever wants to deal with.
Minimizing your tax obligations is a great thing, but it is essential that you follow the rules. You can always go to the IRS website to search for help. It is always best to spend some time researching and learning about deductions and other ways to save money rather than to get in trouble for doing something wrong later. The best way to avoid trouble with the IRS is to seek out a tax professional or accountant who can advise you on whether you're eligible for certain deductions and recommend other ways to cut down on your tax obligations.