Business Tax Tips

Below are some tax tips for your business that should help as you continue to set up your new business.  Hopefully this sheds some light on the ins and outs of business tax.  Please let us know if you have any further questions and we look forward to working with you as you grow your business!

 

  • Contract labor – if you hire an independent contractor, you’ll want to have them fill out a Form W-9, and you’ll have to send them a 1099 if you pay them over $600 during the year. There are specific rules on determining if workers are independent contractors or employees.  Be sure to ask us if you need clarification.
  •  Employees – payroll and other benefits are tax deductible. You want to ensure your business is properly registered with the correct state and IRS agencies.
  •  Fixed Assets – generally, on the tax return, fixed assets (property and equipment) need to be capitalized.  We recommend clients keep track of fixed asset purchases over $500 to be capitalized and under $500 to expense. New IRS regulations also heavily scrutinize expenses for repairs and maintenance, so we recommend you keep detailed records of these expenses, they can be properly categorized on your tax return.
  •  Self-employed health insurance deduction – health insurance paid on behalf of the sole proprietor as a self-employed taxpayer is deductible (including premiums paid for the taxpayer, spouse, dependents).  Premiums are deductible only up to the amount of net profit in the business.
  •  Car and Truck Expenses – Keep track of your business-related mileage, as you can deduct it on your tax return.  This does not include mileage for commuting (home to work, work to home), but any other mileage for business purposes.  The IRS requires a written record of mileage, so most people find it easiest to keep in a calendar or planner. We will also need to know your total mileage for business AND personal mileage for the year, in order to complete your tax return.
  •  Travel – expenses while traveling out of town (car rental, airfare, lodging) is deductible.  Mileage and meals/entertainment while traveling are subject to the other requirements listed.
  •  Meals and entertainment – deductible if incurred while traveling on business or while entertaining a client, customer, or employee.  Deductions for meals and entertainment are limited to 50% of the expense.  Keep track of the total amount, and we will do the calculation on the tax return.
  •  Gifts – gifts are deductible up to $25 per individual your business makes a gift to.
  •  Other business expenses – other business expenses that have proper business substantiation are deductible. Be sure to keep proper documentation for the business purpose and receipt of purchase.