As a small business owner, there are a lot of different facets of your business that need your direct attention. From office space, advertising,and enhancing employee satisfaction, it is likely you have your hands full. But one extremely important aspect of managing a business that sometimes slips many small business owner’s minds is federal income tax.
While extremely important, it can be easy for entrepreneurs to focus on the micro and lose track of what they owe the government in Spring. To help ease the mind of small business owners everywhere, below are three important tips to help you prosper in the face of federal income tax.
Deduct, Repeat as Necessary
According to the IRS, businesses can deduct expenses deemed both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. Some of the most common business deductions include rent on abusiness or home office, work supplies, and furniture and equipment. Additionally, if you are able to provide healthcare benefits for your employees, you can deduct that as well.
It’s important to do your research and not allow your tax deductibles to become an afterthought. According to Global Resources Reviews, “controlling costs” is key when attempting to accelerate growth. If you do not pay close attention to the things you can deduct on your federal income tax, you may find you are losing more of your hard-earned money than you should be.
Not All Tax Burdens are Created Equal
All small businesses do not endure the same tax requirements – names matter. The legal entity you select to form under can affect how much you pay in taxes. Sole proprietorships and LLCs, S corporations and partnerships are all various business types, each with their own benefits and limitations. S corporations are ordinary business corporations, while C corporation is defined as any corporation that is taxed separately from its owner(s).
Ask around and do your research to find what is right for you.
Remember to Pay
If you are a new small business owner, then you are probably unfamiliar with paying self-employment taxes.
To help you through tax time, small business owners must remember to deduct the employer-equivalent component of their self-employment tax.
Keeping track of taxes as a small business owner can certainly be stressful, but by learning how to keep track of your deductibles and expenses, making your dollar stretch does not have to be as difficult as you may think.