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tax deductions for small business

Tax Deductions for Small Business You Should Know

Tax deductions can go a long way in helping you get more out of your get mall business. A lot of business owners might feel hesitant to take full advantage of all the tax deductions they qualify for, but this shouldn’t be the case. As long as your business is doing its part and paying tax, there’s no reason why you shouldn’t take advantage of permissible tax deductions. After all, the extra money you get for your business by deducting certain expenses can be spent on growing your business which, in turn, will mean that you can contribute even more to the economy.

With that in mind, there are a number of things you can (and should) legally deduct from your taxes.

Rent for Your Business Premises

Renting your business premises is probably one of your larger business expenses. For that exact reason, tax deductions on your rent can make a big difference for your business financially. The more expensive the rent on your premises, the bigger the advantage of deducting this expense, so if you have a large business premises with hefty rent, this can help to lighten the load.

It doesn’t matter what kind of business you have either. Shop owners, healthcare practitioners and even automotive businesses can all take advantage of this deduction. The only prerequisite is paying rent on your business premises.

Vehicle Maintenance and Upkeep

Vehicles are another big business expense for a lot of small businesses. By keeping track of all your business expenses related to your company vehicles, you can deduct your vehicle expenses from your tax. Examples of vehicle expenses that can be tax deductible includes money spent on fuel, vehicle maintenance and repairs, parking and even tolls.

If you’re not keen on all the extra admin involved in tracking each individual vehicle expense, you also have the option of using the IRS standard mileage rate, which is currently sitting at 58 cents per mile driven.

Another alternative is to choose whatever option gets you the best tax return. To calculate this, you will have to keep track of all your vehicle expenses, which means it will involve a lot of work, but it might be worth it if your business owns any vehicles that are more expensive to maintain due to higher fuel consumption or more expensive service parts.

Any vehicle used for business purposes can qualify for this deduction, whether it’s a car, truck or even motorcycles. There are some exceptions to motorcycles, thought. For instance, you’re not allowed to use the IRS flat rate for a motorcycle. The only way you can get deductions for a motorcycle, is by keeping track of all your business-related transport expenses.

Computer Software

Almost all businesses have computers. As a result, most small businesses can benefit from deducting computer software. Whether you have an office and you pay an annual expense for your operating system, word editors and slideshow software, or you have a graphics design firm and you run programs to create images, you can deduct your computer software as a small business expense.

To take full advantage of this deduction, look into all the software and even online tools you use for your small business. You might even be able to deduct the fee you pay to your email service provider or money spent on bookkeeping software.

Advertising and Marketing Expenses

Money spent on advertising and marketing is a business expense, often a big one. You’ll be happy to learn that all the money you spend on advertising in tax deductible, which makes sense, as all advertising is related to business.

There are so many different things that you can deduct as a marketing or advertising expense. If you start to add it all up, it will quickly amount to a staggering figure. Here are some of the things you can potentially deduct as marketing expenses:

  • Business cards
  • Pamphlets
  • Paid advertisements in your local newspaper
  • Advertisements on billboards
  • Promotional materials and goods
  • Your company website expenses
  • Online marketing expenses

This means that any marketing expense can be deducted from your tax. Whether you want to make branded keychain holders to hand out at a corporate event, or print promotional pamphlets, these expenses will usually be tax deductible.

If you spend money on any online marketing-related software or services – such as an email newsletter service provider or pay per click advertising – it might also be worth investigating whether you can deduct these expenses. Perhaps you find you’re unable to deduct the expense for your email newsletter as computer software, but you can deduct it as an advertising or marketing expense instead.

Office Supplies

If you have an office for your small business, there’s a good chance you spend a lot of money each here on office supplies. Whether you’re buying printer ink, paper or pens. Even coffee, tea, milk and cookies can count if you regularly stock your office with these items for your employees.

No matter what industry you work in, your business will have admin, which means your business can deduct for office supplies. It’s easy to get so lost in deducting for expenses directly related to your industry, that you forget to deduct business expenses related to your admin.

Money spent on postage, shipping and delivery fees might be another hidden deduction you can get, which can help a lot if your business regularly makes use of such services.

Furniture and Equipment

Any equipment you purchase for your business (such as computers or printers) and even furniture can be deducted from your tax. There is, however, a catch here. You have the choice between either a full deduction for these items in the year you purchased them, or to depreciate them over a seven year period.

What you choose will depend on what’s best for your business. If you’re uncertain about which option is better and more applicable to your situation, it’s always best to consult your accountant about the matter.

Business-Related Education

If you spent money the past year on education for yourself, or any of your employees, you might just be eligible for a tax deduction. Expenses for seminars, workshops, classes and college programs can be seen as a business expense if it’s related to your industry.

To comply with safety regulations, businesses often have to send employees for first aid and safety training. If this is the case for your business, it’s good to know these forms of training will almost always be a tax deductible expense, as it is education related to your business.

The only important rule for deducting education as a business expense is that it has to be related to your business. You can’t deduct education expenses if you undertook it for personal reasons. If, for instance, you went for cooking classes or dog training lessons, you probably won’t be able to deduct this unless it’s related to your industry and it can benefit your business.

Cleaning Expenses

Cleaning is part of your business upkeep, so if you hired a professional cleaning company to clean at your business premises, there’s a good chance you can deduct it as a business expense. Regardless of if you hired a company to do mundane cleaning work at your office, or if you made use of a specialized cleaning service, cleaning is a tax deductible expense for your business, as it’s a necessary part of keeping your business premises hygienic and safe.

Some cleaning expenses that you may be able to deduct include:

  • Pressure washing your business premises both inside or out
  • Regular or high-rise window cleaning services
  • Carpet cleaning
  • Dry cleaning uniforms
  • Everyday cleaning services

Cleaning is an expense your business will incur every year, so adding it to your tax deductions can make a big difference.

Business-Related Supplies

Business supplies are one of the more obvious expenses, but it’s important to check all of your expenses in this area to make sure you’re getting all the deductions you can.

If you run a store, for instance, it’s obvious that you can deduct all the stock you bought in the past year as a business expense. At the same time, businesses that provide a service must also remember that all supplies they need to complete their service are business supplies. This could be building materials for a contracting firm, or cleaning supplies for a cleaning company.

However, there may be some hidden supplies that your business could possibly get deductions for. If you buy any cleaning supplies to clean your business premises, or if you buy uniforms, there’s a good chance you’ll be able to deduct these expenses.

Always Consult Your Accountant

To so stay within the legal bounds of tax deductions, it’s always best to get an expert opinion. Hiring an accountant can help you stay current with your taxes and avoid penalties for illicit tax deductions or practices. As an added benefit, the money you spend on financial services for your business (like your accountant) is also tax deductible!

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How to Register Your Small Business for Tax?

If you recently started a small business, or your looking to do so, tax is an important subject that you simply can’t ignore. You must know how to register your small business for tax, or whether tax registration is even necessary in for your business.

A lot of small business owners feel intimidated by tax rules, so much so that it might deter some people from starting a business altogether. The idea of an already unstable income combined with uncertainty on how to fulfil tax obligations is a major sore point.

Don’t let the fear of tax get in your way of achieving something great. Tax can seem daunting, but it doesn’t have to be. There are a few simple ways in which you can make sure that your business is paying tax the right way. One of the first ways to start, is to register your business for tax in a way that suits your industry.

Does My Small Business Need to Pay Tax?

Paying tax won’t be an issue if your business doesn’t need to, so asking the question of whether you need to pay tax is a logical place to start. Unfortunately, no profitable small business is normally small enough to qualify for tax exemption.

Very few people expect a child running a lemonade stand to pay tax on their earnings. Realistically, these earnings are too small to amount to anything significant. Similarly, if someone bakes cookies and sells them from home, it may be more of a hobby than a serious business venture, and this is likely to reflect in the earnings.

You’ll know if your small business is more of a hobby than anything else. If you’re a hobbyist, chances you’ll end up spending all your earnings to support your hobby, meaning you won’t truly have a profit, so you’re not running a business, as all your earnings go back into your hobby rather than to contribute to your personal expenses.

It should be noted that the gap for earning without being liable to pay taxes is very narrow. Even if you’re working alone without any employees as a sole proprietorship, your earnings are be taxable. This is especially true if you’re a freelancer, contractor or any other kind of service provider and you earn most of your income through your business.

If your earnings are substantial enough that you can buy groceries, pay rent or afford to cover any of your personal expenses with your business earnings, you should consider yourself to be a small business owner, which means your business is tax liable.

Different Ways to Register Your Small Business for Tax

How you pay small business tax will depend on how you registered your business with the IRS. If you’re still in the process of starting your business, here are the different ways you can register:

  • Sole proprietorship: This is the simplest business structure. It’s easy to start, seeing as you don’t need any formal registration to run your business as a sole proprietor. As a sole proprietor, you’ll be entitled to all of your business earnings, with no legal distinction between yourself and your business. The benefit of running a sole proprietorship is that it’s simple and easy, the disadvantage is that you’ll also be liable for any debt incurred by your business, meaning your personal assets are at risk.
  • Partnership: Where two or more persons decided to start a business venture together, a business is considered to be a partnership. Depending on how a partnership is registered, business partners (like sole proprietors) can be responsible for all business losses, placing their personal assets at risk. This is known as a general partnership.
  • Limited liability company (LLC): Registering an LLC is a good option for many different business owners. The main benefit of an LLC is that the business owners or any shareholders aren’t liable for business debts or legal fees incurred, protecting personal assets. Additionally, business owners have the choice whether their LLC company should be taxed as a personal proprietor, partnership, S-corporation or C-corporation.
  • Corporation: Corporations are owned by stockholders and require a set structure. Corporations can fall in either one of two categories – S or C-corporations. It’s unlikely that you’ll register your new small business as a corporation, seeing as stockholders are required to elect a board of directors for a corporation. Although some small business owners register as the sole stockholder and appoint themselves as the a single-person board of directors, this business model doesn’t lend itself well to most small businesses that are just starting out.

As mentioned above, there are different ways in which you can register an LLC for tax. While registering an LLC to be taxed as a sole proprietorship or partnership won’t change the tax rules that your business falls under, there are two unique corporate tax regimes for LLC companies. Here’s some more information about registering your business as an S or C-corporation.

  • S-corporation: With the S-corporation model, the business entity pays no income tax. Instead, the tax liability of the business tax is distributed to the S shareholders on a personal income tax level. To qualify as an S-corporation, a business must be a domestic corporation (i.e. not foreign) and have no more than 100 shareholders. Additionally, an S-corporation may only have 1 class of shares. Certain businesses, such as financial corporations, are ineligible to be registered as S-corporations.
  • C-corporation: Unlike an S-corporation, C-corporations are taxed independently of their business owners. With a C-corporation, there’s no limit with regards to how many shareholders a company may have. Furthermore, rules regarding foreign shareholders are more relaxed. Because of this, most major corporate companies are taxed as C-corporations

For most new businesses, sole proprietorship is the most popular choice. It’s easy and doesn’t require any upfront investment in terms of registering your business. Once your business expands, however, registering it as an LLC to be taxed as sole proprietorship can be a good way to protect your personal assets.

Tax Rates for Different Small Businesses

Your taxable income will differ depending on how your business is registered for tax. Here are the business tax rates:

  • Sole proprietorships pay a 13.3% tax rate
  • Partnerships pay a 23.6% tax rate
  • S-Corporation pay a 26.9% tax rate
  • C-corporations pay a 17.5% tax rate

Keep in mind that for these tax rates to apply, your business must fall within the guidelines of a small business in your industry. For new businesses, this usually isn’t a problem. Most freelancers, contractors or even healthcare professionals with a healthcare practice quite easily fall into the specifications set for small businesses. Similarly, small building contract firms, plumbers or other service providers are usually eligible to qualify for small business tax rates.

Different Kinds of Small Business Taxes

Although it can be tempting to register your business as a sole proprietorship simply to take advantage of the 13.3% tax rate, there are other taxes that small business owners must pay, which can complicate your choice.

Depending on your business model, there are different kinds of tax you might have to pay such as:

  • Income tax
  • Employment/Payroll tax
  • Self-employment tax
  • Excise tax
  • Sales tax
  • Property tax

While all businesses are required to pay some form income tax, you won’t be liable to employment tax if you have no employees, not would you need to pay excise tax if you don’t sell eligible products such as cigarettes or liquor.

If you register your business as a sole proprietorship, you’ll usually have to pay self-employment tax. Self-employment tax covers tax expenses that are normally at least partially covered by your employer, such as Social Security and Medicare. You are liable to pay self-employment taxes if you’re self-employed and your net earnings in the past year were at least $400.

How to Pay Small Business Tax for the first time?

Whether you’re starting a new business, or you already have a young startup and you need to pay tax for the first time, consulting an accountant is the best way to help you stay on track with your tax obligations.

Although owning a sole proprietorship can simplify your taxes, there are various reasons why getting an accountant is still the best choice, especially when you’re just starting out.

Firstly, you may choose to register your business under a different tax regime than sole proprietorship, which can complicate your taxes. Even if you register as a partnership, tax rules can become daunting.

Secondly, your first year or two of business will be a busy time. You’ll need to learn a lot about your industry to succeed. You’re unlikely to have enough time to learn enough about filing your small business tax correctly, which could place you at risk for penalties for late payments and other mistakes.

Most importantly, consulting an accountant is a great way to get professional, trustworthy advice on how you should register your business for tax, giving you a head start on your small business tax.

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Tax Reform Changes and How They Affect Your Tax Return

Tax is a necessary but unpopular subject for most people. While most people are more than willing to pay tax, the tax system can seem daunting and hard to navigate, especially since it’s always changing. Just when you think you’re in the swing of things, the tax rules change again.

The 2018 tax reform bill, instituted by President Trump, was passed all the way back in late 2017. This new bill is called The Tax Cuts and Jobs Act, and under it many new rules will apply this tax season.

Although the bill was passed in late 2017, you’ll only see the effects of it in your income tax by this year. Overall the bill is meant to simplify and lower the tax you pay – of course, the efficacy of the bill in lowering your personal income taxes will, among other things, be determined by whether you know how the new system works to take advantage of the changes.

With income tax season upon us, learning about the recent tax changes is going to be an essential part of getting your tax done this year. Here’s what you’ll need to know to file your taxes in 2019.

Standard vs Itemized Deductions New Rules

In the past, itemized deductions were often the best way to go if you didn’t want to overpay on tax. However, in 2019 this probably won’t be the case. That’s because the amount for standard tax deductions is now approximately twice as much as it used to be.

If you’re a little confused as to what this means for you, let’s take a step back to distinguish between standard and itemized tax deductions.

Standard and itemized deductions are two different options that allow tax payers to reduce their amount of taxable income. As an overly basic example, if someone earns $24,000 annually and they are eligible for a tax deduction of $4000, they’re taxable income would be $20,000. So instead of being taxed on all their income, they’re being taxed as follows:

annual income – tax deduction = annual taxable income

There are two different ways in which tax payers can determine what tax deduction they’re eligible for:

  • Standard tax deductions
  • Itemized tax deductions

Standard tax deductions, as the name implies, is a standard or fixed amount that can be subtracted from your annual income to determine your taxable income. This amount is set by the government and will apply to every tax payer who chooses to make use of standard tax deductions.

The benefit of going with standard tax deductions is that it’s simple, less time-consuming and generally just a lot easier than itemized deductions. Although in some cases, especially before 2019, there was a good chance choosing standard tax deductions also meant you’d end up with a smaller tax deduction. This lead to a higher taxable income – so in the end, you’d be paying more tax.

Unlike standard tax deductions, itemized deductions can differ completely from one tax payer to another. Instead of paying a standard amount, you’ll need to keep track of all your tax deductible expenses in order to list them when you file your tax. If your tax deductible expenses add up to more than the standard tax deduction amount, then putting in the extra bookkeeping effort and tracking your tax deductible expenses will be well worthwhile.

Last year, approximately 70% of tax payers took the standard deduction route. This could be because tax payers found that the standard tax deduction allowed them to pay less tax. But it could also be an indication that most tax payers don’t want to keep track of tax deductible expenses.

The good news is that the 2019 Tax Reform Law will make it much less likely that tax payers will benefit from choosing to file tax with itemized deductions. This is because the standard tax deduction has been bumped up quite a bit. For comparison, here’s how much standard tax deductions have increased since 2017:

  • For single filers the standard deduction goes from $6350 to $12,000
  • For married couples filing jointly, the standard tax deduction goes up to $24,000 from $12,700 in previous years
  • If you’re 65 or older, you can expect to add another $1300-$1600 onto your standard deduction, depending on whether you’re married
  • For heads of households, the standard tax deduction is now $18,000

But while standard deductions have gone up, itemized deductions have gone down. This is because many expenses that were previously tax deductible are now limited for deductions.

Most notably, state and local taxes (called SALT for short) were seen as a tax deductible expense with no limit. This meant filers paying high taxes in their local state could file all of the taxes paid in the state or area where they lived as a tax deductible expense. Under the new tax rules, there’s a cap as to how much state and local taxes will be deductible, and that number is sitting on $10,000. Some examples of SALT taxes include:

  • Property tax
  • Local income tax
  • Sales tax

The states that will be hit most hard by this new change will be the high tax states such as California, New Jersey, New York and Maryland. Florida, along a few other states, doesn’t currently have state taxes, so this change currently isn’t relevant locally. Many other states have some state-specific income tax, but this is limited to dividends and income from investments.

Lower Tax Across All Income Tax Brackets

The new tax bill will also reduce the percentage of tax all tax payers across different income brackets will need to pay.  Many tax payers have already seen the change resulting from the lower tax to their monthly salaries, as a lower percentage of income is now deductible.

For the highest earners, 39.6% of income was deductible in previous years, whereas this year that number has reduced to 37%. Here’s how taxes are now reduced based on annual income:

  • Single filers earning between $38,701 and $82,500 will pay will go down 3%
  • Married tax payers filing jointly who earn between $77,401 and $165,000 also drops by 3%

Generally, this will lead to lower taxes for most households. However, it should be noted that you can no longer get personal exemptions, which could negatively affect some households.

Increase in Child Tax Credit

Child tax credit has been bumped up from $1000 to $2000 per qualifying child under the age of 17. Tax payers with higher incomes will now also be eligible for child tax credit.

Another benefit of the new tax bill is that tax payers will also be eligible for $500 tax credit for very other dependent they support. These dependents could include children over the age of 17, parents, siblings or even distant relatives. This will help tax payers who are supporting a large number of dependents to save quite a reasonable amount of tax.

Some other notable changes of the 2019 tax reform is a drop in corporate tax from 35% to 21%. Another change is that medical expenses will only be deductible if they exceed 7.5% of a tax payer’s adjusted gross income.

Get Professional Tax Advice

Navigating taxes for yourself and your business can be a difficult task. The current tax reform will be in practice from its inception in 2017 up until approximately 2025 for income tax. After this, the future of income tax is still uncertain, but there’s good possibility that things will change again.

If you’re a business owner, focusing on tax could cost you precious time you could be spending to build your business. Making use a professional accountant or bookkeeping firm can save you money, hassle and time on doing your tax, allowing you to focus on growing your business and income. Call Choice Accounting Solutions to learn more about how we can help you stay current with all your tax, without the need for you to waste time learning about new changes every tax season.

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7 Ways a Business Owner Should Spend Their Tax Refund

It’s always a happy day: You received that fat, juicy tax refund check in the mail or deposited into your bank account. Perhaps your refund was due to the impact of the “TCJA” (“Tax Cuts and Jobs Act” of 2017) – Did your business overpay during the year due to the reduction in tax rates to 21% for corporations? Or did your partnership perhaps overpay due to the 20% deduction for pass-through entities, the so-called “QBI” (Section 199A “Qualified Business Income”) deduction?

Twiddling your thumbs in glee ( … in your office … with the door closed), you nonetheless ponder within yourself: Eeny, meeny, miny, moe – spending tax refund, saving tax refund, spending tax refund, saving tax refund? The good news is, since it’s your tax refund, really, you can enjoy a twofer, and both spend and save it. The even better news is, there are so many great ways you can invest that “found money” to improve your business operations:

1. Pay down debt

Interest costs may be one of the larger or typical business owner expenses you frown upon. That nagging loan may not have the most favorable terms, or that company credit card is carrying an exorbitant interest rate. Use some (or all) of the refund to prop up your income statement by reducing interest expense, or to breathe a sigh of relief when lightening your debt load. This is a classic scenario where spending money today saves money tomorrow.

2. Focus on marketing

An area worthy of your attention might be your company’s advertising or marketing efforts. Maybe you always wanted to try that catchy radio ad for your business? Perhaps you prefer to focus on your online business channel and so would like to do better on the SEO front? Whatever the endeavor, you know that spending the refund on marketing is beneficial to your business and, as such, money well spent.

3. Invest in your employees

Along with your customers, employees are the lifeblood of your business. You could implement a paid family leave policy under the new regulations and also get a tax break on some of those payroll costs. Consider sending your key people to seminars or continuing education, which helps them develop personally and professionally while also improving the quality of their work and potential contributions to the company. The ways in which you can make your employees happy today and improve your bottom line tomorrow are almost endless.

4. Invest in yourself

Yes, go ahead, as the owner you deserve it. The avenues open to you are innumerable here, too. Perhaps upgrading to that business smartphone you’ve been longing after will also bolster your work productivity by leaps and bounds? How is your SEP IRA, and how is your Keogh Plan looking these days – could it use a little bit of a tax-deferred boost? If for no other reason, then, a happier boss is also a better boss, right?

5. Purchase machinery and equipment

As far as business owner expenses go, you could reduce your taxable income and invest in that machine the business so badly needs – the new tax law allows for full write-off of business equipment the year it is placed in service. Yes indeed, 100%. Maybe it’s finally time for that new pick-up truck your business can’t live without? The favorable bonus depreciation and Section 179 regulations surely add incentive to invest in your company’s capital equipment.

6. Opportunity awaits

Opportunity Zones, that is. If your business had a capital gain in some area during the year, following certain procedures under the new law, you could invest it in a so-called “QOF” (“Qualified Opportunity Fund”) to defer taxes on it. At the same time, your investment helps raise the overall community economic situation, which in turn can only benefit your business, too.

7. Save some, donate some

There’s nothing wrong with saving some of that refund, either. Be it for a rainy day, or that one outrageous expense nobody could possibly foresee, saving money is always one of the wise choices in life. Perhaps you need to bolster your cash position to apply for that new loan you need to expand the business? You may be looking to grow the business through acquisitions, and that extra cash could certainly come in handy.

The flip side of the coin might be considered donating some of your refund to a charitable organization or cause. Aside from the true spiritual satisfaction of participating in a good deed, this is similar in some ways to an intangible asset:
your donation or contribution also enhances goodwill in the community toward your business and helps build a foundation for an excellent reputation.

In so many different ways and sometimes even inadvertently, spending money today can also be an indirect route to either saving money or earning more money in the future.

Finally, despite all of the magnificent options for what to do with your refund, it behooves us to still remember this basic principle: While bringing on a sense of elation at receiving this large stash of “extra” money, it is not, actually, “extra” at all. It is really just the return of an interest-free loan given – to some extent voluntarily and unnecessarily – back to its rightful owner by the national government.

Of course, we’re human, and we feel like jumping with joy when this unexpected “gift” comes our way. In this regard, though, it’s always useful to remind ourselves with a lesson from Finance 101 ( … yes, that class way back when, the one where we’d wake up with a calculator clenched in our hand…): the time value of money. In general, money is worth more the sooner it is received (and invested).

Possessing an extra $100 routinely each month during the course of the year usually just can’t compare with the gratifying jolt of receiving $1,200 in one big, celebratory chunk. We’re just human. So, it’s reassuring and comforting to know that there are – really, truly – wonderful options to spend your tax refund in a manner that significantly improves your business operations.

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Understanding Business Taxes: Is Schedule C Right for Me?

Everyone has to file their taxes with the US government. That applies to everyone who earns an income, whether you’re an employee or a business owner. Of course, while filling personal taxes can be complicated and painful, filing business taxes can be even more confusing. Take Schedule C for instance – while it’s one of the most commonly used forms for business owners filing their taxes, it’s not the right option for everyone. Is it right for you? Let’s dig into the question a bit more.

What Is Schedule C?

According to the IRS, Schedule C is “the tax form filed by most sole proprietors. It Is used to report both income and losses. Many times, Schedule C filers are self-employed taxpayers who are just getting their businesses started. In addition to those who do well at the start, this group can also include new business owners who make very little or no profit, or even lose money.”

So, from that explanation we can gather a few facts. First off, Schedule C is designed primarily for small business owners. More specifically, it’s the most frequently used tax form for sole proprietors. Second, it’s primarily used by business owners, entrepreneurs, or self-employed professionals who don’t make a great deal of money (there’s also a Schedule C EZ form).

What Is Schedule C EZ?

The Schedule C EZ form is similar to the standard Schedule C form, but it has been simplified. It’s analogous to the 1040 and 1040 EZ forms, but geared for business owners. Like the 1040 EZ, only certain people can use the Schedule C EZ form. You need to have earned a profit with your business, but cannot have more than $5,000 in expenses. You also cannot have any inventory or employees. To file, you cannot be using depreciation to save money on taxes, and you cannot deduct the cost of your home, either.

Who Cannot Use Schedule C?

Now that we’ve established what Schedule C is, let’s consider who can (and should) actually use this form. Basically, the form is primarily designed for sole proprietors and for single-member LLCs. If you don’t fall into those two categories, then Schedule C is likely not the right form for your particular needs. Not sure what form you actually need to use? Work with a professional tax preparer to ensure that you’re using the right forms and maximizing your tax savings.

Tips for Filing Schedule C

If you’re not able to file Schedule C EZ, then the standard Schedule C form will likely be what you need to file. Below, we’ll cover some important tips for completing this form accurately to help avoid the chance of an IRS audit and to ensure that you’re reducing your tax liability as much as possible.

Pay Early: You need to ensure that you’re paying your Social Security and Medicaid deductions to the IRS quarterly. While you can wait until the end of the year, it’s better to pay those regularly.

One Business, One Form: It’s important to note that the Schedule C form represents the profit and loss for only a single business. You cannot use it for more than one business. So, if you own multiple businesses and they all qualify, then you’ll need to file a Schedule C form for each of those businesses.

Business Code: Make sure you choose the right business code for your organization. There are quite a few different codes in use, and they have a direct impact on your business taxes. If you cannot find the code that best represents your business, speak with a professional tax preparation expert.

Record the Right Income: The heart of the Schedule C form is the income allocation section. Here, you list the income that your business earned throughout the year. As a sole proprietor or a single member LLC, that income may come in one of many forms. For instance, it could be income earned as a freelancer. It could be income from independent contracting. It could be income generated by consulting for other companies, or even the government. It might be income reported from self-employment. Note that you can fill out Schedule C even if you did not make an actual profit – it’s possible to earn income without profiting.

Have the Right Information: When filing a Schedule C with the IRS, you’ll need to make sure you have the right information and documentation to support your filing. You’ll need a profit and loss statement covering the entire year (you might be more familiar with this as an income statement). You’ll also need your year ending balance sheet, as well as a statement about any assets purchased during the preceding tax year (2017 for those filing in 2018).

You will need to prepare a cost of goods sold calculation based on your inventory if your company deals with physical products. You’ll also need other information related to expenses, such as vehicle maintenance and travel, meals, entertainment expenses, accommodations during travel, and any other qualifying home-business expenses. Make sure you keep accurate records throughout the year. You don’t want to be scrambling to find this information when tax time rolls around – save receipts, and keep meticulous notes about qualifying expenses.

Not Sure How to Complete Schedule C?

If you’re not sure you can complete Schedule C accurately, or want to ensure that you’re not handing over money that you could otherwise save for yourself to Uncle Sam, the best option is to work with a professional who specializes in business taxes. Trying to go it alone here can mean paying far more than you should in taxes, missing important deductions and exemptions, and could even mean increasing the likelihood that you’ll be targeted for an IRS audit. Working with a professional helps ensure that doesn’t happen to you.

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Three Mindset Changes That Will Help You Save On Taxes

Tax season is dreaded by almost everyone. What is important to remember is that there are ways to save on your tax return that should be practiced in order to get the most of your hard earned money possible. If you are in the Miami area, it is wise to consider Miami bookkeeping to see ways to reduce your taxes. By investing in bookkeeping services in Miami, you will learn that saving money on taxes is a philosophy of personal or business practice that must be learned over time. Here are three tips to change your mindset so that you can save money on your taxes:

Do Not Settle Overdue Debt All At Once.

If you have been financially struggling, it could be wise to settle debts at separate times if the opportunity presents itself. The reason for this is that you are taxed on the amount that you saved money on by doing your settlement agreement.

Do Not Include January In Your Tax Return.

If you practice the philosophy that your fiscal year ends in December, you are allowed to carry January onto the next return. This could save you a great deal of money.

Audit Your Personal Or Business Expenses Weekly.

This is a tip that is often missed. Many times, both individuals and companies are not consciously aware of what they are spending and how it could negatively effect their taxes. By conducting a weekly self-audit, you will be amazed at what you can prospectively save.

When contemplating how to approach filing your taxes, it is important to remember that there are productive ways to save money. You are at an advantage to implement this into your business or personal mindset so that you are taking home the highest amount of your earned capital as possible.

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