3 Essential Tax Tips For Small Business Owners
Posted on: 2 November 2017
Being a business owner has its benefits. Not only are you able to make decisions and run the business as you see fit, but you will also act as your own boss, which gives you flexibility and profits. Unfortunately, most new business owners do not have the knowledge or skills needed to handle their taxes. If you are a new owner of a small business, it is time to learn a few essential tips to help you during tax time.
Remember Payroll Taxes
Even small business owners will need to hire employees to ensure the company runs in a smooth, productive, and successful manner. As the owner, you will be responsible for withholding, depositing, reporting, and paying employment taxes.
Employment taxes cover social security and unemployment, among other things. The IRS will design a plan to pay these taxes, and the timeline will depend on a few factors, including your earnings and the size of the business. In most cases, you will pay the payroll taxes annually, but some businesses opt to pay the taxes quarterly or monthly.
Avoid Mistakes
You should never be in a position where you owe the Internal Revenue Service, so it is important to stay up to date and knowledgeable about taxes for your business. Making mistakes when it comes to tax time or payroll services can be devastating to your business. If you are just starting out, these mistakes can be costly, resulting in the close of your small business.
Consider investing in an accountant, tax specialist, or small business bookkeeping service that handles all of your payroll and tax needs to help you avoid these common mistakes:
- Underpaying Taxes
- Late Filing of Taxes
- Failing to Pay Taxes
Know Deductions
You may know how to run a business and manage employees, but you probably do not know what you can and cannot deduct on your taxes. Most business owners believe the more you can deduct, the better, but that is not actually the case.
In the United States, mileage can be deducted successfully if you use your vehicle for the business. Travel expenses, such as hotel stays, airfare, car rentals, dining, and tips can also be deducted if these elements of the trip were used for your business. Lastly, make sure to take deductions for a home office that is used for your business only. The home office should be a separate room that is used only for your business needs.
Many business owners believe they are able to deduct gifts for clients and business attire, but that is false. Attempting to deduct these items will send up a red flag, increasing your risk of an audit.
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