Helpful Tax Tips for Small Business Owners
Financial management in small businesses is not only concerned about the costs incurred and the profit generated by the business. It also does not only focus on how the business will be able to pay off the small business loans or business start up loans that it has requested from several lenders or credit agencies. Financial management in small-scale businesses is also very much concerned about the way business owners handle and pay off their taxes.
Yes, business owners are not only liable to their chosen lenders and credit organizations that may have extended them small business loans or start-up business loans. In fact, they also have liabilities to the federal or state government in the form of the taxes. And managing such payments can surely be very confusing especially to people who do not have knowledge on finance and business management.
So to help entrepreneurs, we have provided helpful tax tips that they can employ as they compute for and pay off taxes of their respective businesses.
Tax Tips for Small Business Owners
1.Write off tax deductions. Businesses can deduct some expenses from their revenues. This way they can reduce their taxable income. But what expenses can be deducted from the profit generated by the business? These can include:
- Business losses. The losses incurred by the business can be deducted against the personal income tax of the business owner.
- Obvious business expenditures. Businesses can also deduct several expenditures that they have incurred from the total taxable income that they will report to the IRS. For example, business trip costs, equipment purchase and employees' compensation can be deducted against the profits generated by the businesses. So business owners are advised not to overlook these important items.
2.Consider your employee taxes. If a business has employees, a variety of taxes will have to be withheld from their wages and compensation. Among these are:
- Withholding tax – Social Security, Medicare and federal and state income taxes must be withheld from the wages of the employees.
- Unemployment Taxes – Businesses must also pay federal and state unemployment taxes.
3.Think about the sales taxes of your business. If a business owner sells products or services that are subject to sales tax, then he or she must file a registration with the state's tax department. After this, all taxable and non-taxable sales must eventually be tracked and included on the sales tax return of the business.
4.Remember to keep your tax documents for a minimum period of seven years. Entrepreneurs are also reminded to employ good record-keeping activities in their respective businesses. They need to keep records of all their tax-related documents, such as tax returns, expense receipts, client 1099 forms and vehicle mileage logs for a minimum period of seven years.
5.Get maximum tax benefits from charitable contributions. To do this, business owners must remember the following things:
- Only those contributions to charities that are listed as “qualified organizations” by the IRS can be deducted from the income tax of the business.
- Contributions that are greater than $250 require a letter of receipt from qualified organization.
- The value of time or service rendered cannot be deducted from the sales or income tax of the business.
- Businesses can only deduct their charitable contributions to qualified organizations only in the year when the contribution was made.
6.Consider tax deductions from your small business loans. Small business loans and business start up loans are not considered business income. Instead they are treated as business expenses that business owners can deduct against the profit their businesses have generated.
7.Get additional information from the IRS website. For additional business tax information, we encourage our readers to visit the website of the IRS.
We hope that the tax tips we have provided above will help business owners effectively manage and completely pay off whatever income taxes and other liabilities they have with the federal or state government.
Irish Taylor is a bussiness loan consultant with Startup Business Loans and has been providing consumers and business owners with startup business financing since 1992. For years she has helped people with credit and loan problems especially pertaining to business start up, SBA loans and Unsecured loans.
Copyright 2010.
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