small bix tax tips Archives - How to Start a Small Business

Tax Deductions are the quickest and most cost-efficient way to add to your bottom line. So why do most people just don’t get it? Because we as business owners and entrepreneurs are so busy working in our businesses, we lack the time and energy to find ways to reduce our taxes. Tax Deductions for Self-Employed For some reason, we erroneously think it’s our accountant or CPA’s job to reduce our tax bill. The reality is, that we don’t know what we don’t know. Today, I’m sharing with you how I was able to save tens of thousands of dollars over the course of my business lifecycle. Get excited as you’ll discover how to increase your tax deductions. In essence, this can reduce your taxes, morally, and ethically! Related Post: Hidden Business Cost of Starting a Business (I’m not an accountant or CPA...this info is written based on my 40 years in business… please consult with your tax adviser before the implementation of any of the ideas expressed within this article.) Here's More Good News; within the 5 minutes it takes to read this post could be Business Profit Changing. This information could significantly change the way you prepare for next year’s tax season. Additionally, you’ll learn tips you can pass on to your tax professional or CPA to increase your potential tax saving. Business Tax Deductions Explained If you implement these strategies (Always talk with your CPA first) next year’s tax season will look different than the year before! How can I be so sure…? I've been implementing some of these same tax strategies for more than 25 years. (*Note all CPAs aren’t equal) be certain to read to the end which I included copies of my tax return from 2016 prepared by 2 different accountants that were given the same info. That’s another reason why you must mind your own business. Help your tax preparer help you!) Did you know that small business owners can benefit from the same tax deductions large corporations use? Yep… there are a plethora of tax deductions that we can use, we need to learn to identify them. This article will Help! One of the secret weapons that I've been using for years to prepare my taxes for the tax preparer. Income Tax Deductions “I recently had a conversation with my younger cousin. He was expressing his Woo’s about the amount of money he’s paying in taxes. After listening intently, I suggested to him the same thing that I will suggest to you. After our conversation, he pulls out his smartphone and immediately took action. His reply was," We must learn to pull the trigger”. He pulled up the info and order the book. He later stated that I must find more legitimate deductions. Taxes are eating US UP!” Related Post: Hidden Business Cost of Starting a Business What Can I Deduct? To be considered a legal tax deduction, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. Capital Expenses Regarding capital expenses, you must capitalize, rather than deduct. These costs are a part of your investment in your business and are called capital expenses. Capital expenses are considered assets in your business. In general, there are three types of costs you capitalize on. ● Business start-up costs ● Business assets ● Improvements Note: You can elect to deduct or amortize certain business start-up costs. (always check with IRS for clarification). Go here for Details: Publication 535, Business Expenses. Schedule Itemized Deductions Generally, you cannot deduct personal, living, or family expenses. However, if you have a hybrid expense. An expense that is part personal and part business. Naturally, there's a formula you can use, be certain to talk with your CPA Ordinary and Necessary Tax Deductions Will Save You Big Time! For example, if you borrow money and use 70% of it for business and the other 30% for personal use, you can deduct 70% of the interest as a business expense. The remaining 30% is personal interest and is not deductible. Click here I.R. S. for Publication 535, Business Expenses, Home Tax Deductions If you use one of your bedrooms for your office, you can deduct a percentage of your home expenses: such as, mortgage interest insurance utilities repairs and depreciation That's in proportion to the size of the space. Want to Start a Business But Have NO Ideas? Your tax advisor will have more details or refer to Home Office Deduction and Publication 587, Business Use of Your Home, for more information. Automobile Business Use If you use your car for business, you can deduct car expenses. However, using your car for both business and personal purposes, you must divide your expenses based on actual mileage. Refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses. List of the Most Common Tax Deductions: (Keep in mind always check with your accountant/CPA to verify what’s a legitimate deduction and what’s not or visit www. IRS.gov) Retirement Plans - Retirement plans are savings plans that offer you tax advantages to set aside money for your own, and your employees' retirement. Donations and Charitable contributions: The organizations must qualify to receive them. Firstly, you can only donate a specific amount. Secondly, you should know what records to keep Finally, know how to report your contributions. Employees' Pay - You can deduct the amount you pay your employees. ● Rent Expense - This is any amount of rent you pay for the use of property you do not own. In general, you can deduct rent as an expense only if the rent is for the property you use in your trade or business. If you have or will receive equity in or title to the property, the rent is not deductible. ● Interest - Business interest expense is an amount charged for the use of the money you borrowed for business activities. ● Taxes - You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses. What is a Tax Deduction? A tax deduction from a business point of view is a dollar amount that the IRS allows you to subtract from your (AGI) adjusted gross income. Every dollar you spend on legitimate, tax-deductible expenses that are reasonable and necessary can be a business write-off. The more you can write off the fewer taxes you pay. So, the key is to identify as many deductions during the year as possible as this will reduce our tax bill. (This is one reason why you can wait until 4-15) I almost forgot to reveal my secret weapon…. Go here for details…. (I’m not an accountant or CPA...this info is written based on my 40 years in business… please consult and share the recommended resources with your tax adviser, (ONLY for Sandy Botkins the tax codes have been included with each tax deduction)….) Conclusion: If you don’t know Uncle Sam, you don’t want to! remember that ADAGE ignorance is bliss; I have to disagree, ignorance can be painful and leave you Penniless. (on a softer note the I.R.S. will work with you. Keep them in the loop… the ABSOLUTE WORSE THING YOU CAN DO IS ignore Him...LOL!) HOMEY DON’T PLAY THAT! Below are copies of my 2016 tax returns. I dropped them off at my CPA. After a few days, I was called to pick them up. Somewhat semi-confident, I bounced my butt back to the office. Once there I retrieved my returns, sit in the car, and took a peek, I just knew I had somewhat of an idea of what I would owe. ..… Boy, was I in for the biggest surprise of the year? My eyes swelled, my heart started to race, and I had to talk myself down… before returning to the office! Thought to myself, I had no idea what I was going to do about my tax Bill…. BUT... I knew it wasn't going to be that! After 40 years of business, you normally have a slight idea of what your tax burden will be, based on your tax deductions. It was not what I had in mind.... the form on the left.. close to $13,000 owed!!!! After receiving a reference from one of our peers ...look at the difference, a little over $3000.00. 😜 Today I have an even (I think) savvier CPA/accountant. His information and knowledge are right in line with Sandy Botkins. So, I’m not saying Sandy has the only system, but he has the only system I know that works… LOL!!! On a serious note, what I’m saying unequivocally, is that we must mind our own businesses. We can't wait until April before getting our tax deductions in order. Because if we wait until then we’ve waited too late. Hope this article helps you as this recommended resource has helped me over the years. Now it's time to hear from you.Are you planning to be proactive? Was this article helpful?Leave your comments below now. Popular Articles Small Business Marketing Strategies 51 Amazing Ways to Grow Your Email List Tax Deductions Proven Ways to Save Thousands