Tips for Filing Small Business Taxes

Tax season is in full swing and citizens everywhere are frantically trying to find old receipts and business owners are especially feeling the pressure of filing taxes correctly in order to receive the biggest refund. Small business owners are already strapped for cash so filing taxes and a possible hefty refund are reasons for taking the time to do it correctly and accurately. If you’re struggling with filing your taxes this year, get the advice and guidance you need from a small business accounting firm that wants to ensure you do get the biggest refund available. Here are some tips to help you get through the complicated process.

Have the right forms

Every business must report business income and expenses and pay taxes on that income. Depending on which type of entity your business was set up as, partnership, sole proprietorships, corporation, or LLC, you will need different forms to file your taxes. Partnerships will report all of their income, losses, and
expenses on form 1065. When sole proprietorships file taxes, a Schedule C needs to be filled out and attached to the personal income tax return. If your business is a corporation or an LLC that is treated as a corporation, form 1120 or 1120S is required. A small business accountant will be able to help you determine which form is correct for your business.

Home Office Deduction

It can be a fine line between this being a legitimate deduction or not, so professional guidance may be needed to help you on this front. If you have a dedicated space in your home that is used for an office, it can count as a deduction; however, it needs to be used only for the business and not for personal use. Previously, in order to determine the amount of the deduction, you would need to figure the amount spent on mortgage or rent and utilities and multiply that number by the percentage of your house that is used for the business. It is by far a simpler process than before and the deduction can be five dollars per square foot of space, up to $1,500. It is possible to use both methods and determine which will give you the biggest refund. Keep in mind, however, that all home expenses and documentation needs to be kept and organized.

Equipment vs. Supplies

Even after years of filing small business taxes, there are some who aren’t sure whether something is considered equipment or supplies. Supplies include items that will be used throughout the year, such as paper or pens. Equipment, or capital expenditures, are more valuable items that last longer than a year, such as computers, printers, furniture, or servers. These larger expenses can be written off for the entire cost of the item.

Insurance Deductions

Many types of insurance from liability, malpractice, workers’ comp, and even health insurance can be deducted. If your business is set up as a sole proprietorship, partnership, or S Corporation, the premiums paid for medical and dental insurance for the owner and their family may be deducted. There is also a potential for qualifying for a 35 percent tax credit on health insurance premiums for business owners who have less than 25 full-time employees.

Travel and Entertainment Expenses

Flying to meet clients, picking up the tab for a potential customer, and even gas that is used driving to meet clients can be a deduction. 50 percent of a dinner tab can be deducted as long as the business is discussed  (UPDATE – this rule has been changed for tax years beginning after 12/31/2017). 100 percent of travel expenses can be deducted; but keep in mind, the main reason for traveling needs to be the business, not a family vacation in which you will meet a client for lunch.

Small businesses everywhere are gathering receipts and getting organized to file taxes. With business entities and tax forms, filing can be a stressful and complicated process. Small business accounting is sometimes better left to the professionals. If you think you could benefit from the expertise of a CPA, please give us a call. We can help you be confident in your filing and ensure you get the biggest refund possible. Don’t let bookkeeping stop you from filing on time this year, call our small business accounting services today.

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