For many businesses, one of the biggest expenses that they need to pay is their taxes. There are many things you can do to help reduce your overall tax burden, which can help increase the profitability of the company. Learn about some of the best business tax tips on this page, and please contact McLan Accounting Services LLC with any questions about how to best handle your taxes.
Take Advantages of Tax Deductions
Tax deductions are a great thing for both individuals and businesses. The number of them available for businesses, however, is significantly larger than for individuals so you can often take advantage of them. For example, most of your startup costs associated with your business will be tax deductible. The costs often need to be amortized over 180 months, but for new businesses up to $5000 can often be deducted in the first year alone.
Are You Running a Business or a Hobby?
One important question you need to ask yourself is whether you are operating a business or a hobby. If you have a hobby that does make some money, even if it isn’t every year, you may want to consider setting it up as a business. This can provide certain tax benefits, especially if you have significant investments into your current hobby. Of course, depending on how you set the business up, there could be disadvantages to this option as well. Weighing the pros and cons of treating an activity like a hobby or a business will help to ensure you get the best tax results.
Do You Qualify for the Schedule C-EZ
If your business qualifies to use the abbreviated Schedule C-EZ rather than the full Schedule C, you can save some time and money. Recent updates to the IRS code have made it so an additional 500,000 small businesses will qualify for this option. The Schedule C-EZ is for sole proprietorships and is how the business will list their profits and losses. Talking to your accountant about this option is an important thing to ensure you are handling your taxes properly.
Do You Use a Home Office
Millions of people work from home in their home offices. Whether this is done as an employee or a business owner, you can often claim that amount of your home as an office deduction. This can help to reduce your total tax obligations over the course of the year. You can also deduct things like Internet expenses, computer costs, and more.
Push Back on the IRS
The IRS often performs audits on businesses, or assesses taxes, fees, and penalties that can add up quickly. If the IRS has said that your business owes more money than you believe it actually does, make sure you respond adequately. Having an accountant or lawyer work with you to counteract the IRS can often get some or all of the additional taxes removed from your account. Just because the IRS says you owe something doesn’t make it necessarily true!