5 Tax Tips Every Small Business Owner Should Know

Our firm does not do taxes, even though I did them for 12 years. When I started my practice, that was a service that I just didn’t want to offer. However, we partner with CPAs and other tax professionals to ensure that the guidance we provide to our clients is in line with the advice that their tax professionals provide.

As part of that guide, there are some tax advantages that most business owners don’t know about or just don’t take advantage of. There are also some “deductions” that should be avoided due to incorrect tax information. Here is a list of the five most common.

Track all expenses constantly

Keep track of all your expenses, including those you pay yourself. Business owners always ask me “what about the things I paid for with my personal credit card?” Yes, everything is deductible; you just need to include it in the accounting records and post it. Keep in mind that the credit card is personal, so do not add that account to your chart of accounts. They will count as contributions from owners or shareholders. TIP: Record these charges monthly so you don’t forget them at the end of the year.

Avoid money leaks

As a small business owner, you are sometimes faced with cash flow problems. As a result, you fall behind in paying your bills and taxes. While your provider may not charge late fees, you better believe the IRS will do so in the form of penalties and interest. And these my friend are not deductible. No, not even the interest part. TIP: Cap this waste of money by paying your taxes on time and use those funds for an expense that is deductible.

Maximize Retirement Contributions

Most small business owners are so busy working on their business that they never stop to think about what they will do once they retire. I’m not even sure you’re thinking about retiring. But the fact is, you will, one day. So you have to make sure you have some kind of savings. There are several retirement plan options that will allow you to set aside some tax-free funds for your retirement, all of which are tax deductible for the business. Yes, you can have your own business retirement plan. Cool right? TIP: Contact your tax advisor and financial advisor to discuss retirement plan options.

Expenses paid personally

I can’t say enough: stop mixing your personal expenses into the business. They are not tax deductible and we accountants know when you are trying to do so. Believe it or not, we are smarter than the average bear. TIP: Don’t mix.

Section 179

The IRS allows you to spend the purchase of a major fixed asset in the first year instead of depreciating it, exposing certain qualifications. You can deduct up to $ 500,000 and reduce your taxable income to zero. TIP: If you can, don’t buy all the equipment until December so you can buy enough and not too much.

What tax tips have you taken advantage of to help keep more money in your business?

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