When it’s time to pay Uncle Sam, there’s no need to break open your wallet and break your bank account. There are many, easy ways to save money on taxes for small business, many of which are easy to learn and implement.
Tax laws change constantly, so it’s smart to always have a qualified tax accountant to turn to when you have questions. Uncle Sam does provide some nice loopholes, but using them wrong can potentially cause a great deal of grief for you and your business.
1. Write-off Your “Going Into Business” Expenses
As you know, starting a business can be very costly. Registering your business with local, state, and federal agencies, finding space to lease or purchase, buying all those office supplies, advertising for employees, hiring an advertising company, and so on. Quite a few of these pre-opening expenses are considered “capital expenses” and are deductible (up to $5000) during your first year of business. If your expenses exceed the $5000 amount (say, $10,000), then you have to deduct the balance evenly over the next 15 years. Although $5000 may not seem like much up front, when added into the tax balance at the end of the year it can be a very welcomed deduction.
2. Entertaining for Business Purposes – Talk Business, Take Notes, and Archive Those Notes.
Taking clients, vendors, and associates out to eat or play a round of golf is a fairly normal and accepted business practice. Not knowing how to write off these expenses for tax purposes is one of the greatest issues encountered by the IRS. The guidelines are simple, but it’s up to you to treat your entertainment like business.
The standard deduction for business entertainment is 50% of the total cost – under these circumstances:
- The expense has a direct relation to (your) business (feed your employees in office during a meeting); or
- The entertainment involves people who directly affect your business and the entertainment happens right before or after the intended business.
Don’t rely on your memory to track this record. Take notes on receipts, shoot yourself an email or somehow have the event recorded as an official record that you can access when filing your tax returns and have on hand in the event of an in-house audit.
3. Deduct the Cost of Software Up to 100%
What business does not include some type of software expense these days? From email to creating spreadsheets, software supports our business and makes us more efficient and profitable.
Therefore, until 2011, you can deduct up to [click to continue…]
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