Essential Tax Tips for Your Small Business

Small-business owners are always on the hunt for money-saving tips and strategies. As we draw closer to tax season, it’s important to take a look at your business finances and determine what exactly you’ll owe to Uncle Sam—and what you might be able to deduct. Keep these tax tips for small businesses in mind.

Travel Costs

If your small business facilitates the need for travel, there are quite a few expenses you can deduct. Airfare, hotel expenses, car rentals, gas and laundry are all deductible in full. Food can only be deducted up to 50 percent, and if you have your family with you, remember not to expense any charges related to their travel.

Claiming a Home Office

If you work from a home office, claim a deduction. You’ve likely been warned away from claiming this on your taxes, for fear of the IRS performing an audit. Not claiming your home office, however, can cost you hundreds to thousands of dollars on your return.

As long as you maintain organized records, you’ll easily be able to prove your deductions are used for business purposes as claimed. There are a few considerations when it comes to a home office:

  • You must have a separate computer for work processes; it will be very difficult to prove that your personal computer is a deductible expense if your family uses it.
  • The office must be separate from the rest of your living space. Your office can’t play double duty; it’s not a spare bedroom for guests, and it’s not a hangout area for the kids.
  • To determine how much of your home expenses you can deduct, simply measure the square footage of your office space and divide it by the total square footage of your home. That number is the percentage that you can claim.

Use Independent Contractors

There are some major advantages to using independent contractors over full-time employees, and many of these advantages are found in the financial savings. Hiring a full-time individual means providing employee benefits, office space, equipment, and worker’s compensation.

When it comes to taxes, you’ll be charged with a share of your employee’s Social Security and Medicare taxes. Instead of handling these taxes, paying an independent contractor means freeing yourself of the obligation of employee taxes.

If Your Business Is in Debt

If your small business is in debt with the IRS, you’ll need to come up with a tax-payment plan as quickly as possible. Those who ignore IRS notices and claims can see their businesses go under and their personal property seized.

Whether you choose to invest personal money into paying off a business debt or you choose to let your business go, it’s important to get in contact with the IRS as soon as you know you won’t be able to pay. They’re more willing to work with business owners and individuals who are proactive about paying off a debt, so call the number listed on any notice you receive immediately.

Consider Getting Help

If your business is new or you’ve found previous tax-filing processes to be too much, consider hiring the help of an accountant or tax professional. Taxes can become complicated, especially when you’re juggling both personal and professional filings. A great accountant can save you a great deal of stress and ensure that everything is done by the book.

If you do hire an accountant, organization will be much easier, and in the case an audit occurs, you’ll have an added bit of protection. If you are in debt with the IRS as the previous section mentions, it’s essential to get professional help. A professional can often negotiate better deals with the IRS, whether that be through an offer in compromise or an installment payment plan.

Maintaining a small business isn’t always the easiest of feats. When tax season rolls around, you’ll be glad you kept these strategies in mind.