Tax season is considered as a challenging exasperating time for small business owners. Because businesses owners are usually don’t have much understanding of the tax code and its implications, therefore, it’s a hectic task for them to file taxes properly and take benefit of all the available business tax deductions.
For a startup, navigating the fuzzy process of tax filing can be made easy with understanding the terms and regulations and by taking help from a tax attorney. Having a basic knowledge of how small business taxation works is vital in ensuring your accounts analyst is doing the work appropriately.
As the April 15 tax-filing deadline is forthcoming, you need to understand the basic tax questions to avoid tax filing mistakes, and get yourself prepared for the next year’s tax-filing period and avail tax deductions. The important tax questions which you needs to considered are as follows:
- What Types of Tax Returns You Owe?
There are many kinds of tax returns that a small business owner owns to different authorities. Most small business owners understand that they only have to file federal taxes and state taxes, but they are ignorant of fact that there are other tax returns as well which they need to considered, those who relates to jurisdictions (county, district, etc) workforce, sales, payroll and property.
- What Are The Tax Codes?
Tax codes are basically tax rules and regulations. The term “tax code” is a compilation of tax laws, like the Internal Revenue Code (IRC), and can also refer to specific tax laws within the IRC. Tax codes are continually altering and it’s essential for every small business owner to keep track of those changes, as they can considerably influence the business.
- What Are Tax Deductible Expenses?
Every smart business should know the answer of this question before start spending money on business. Many small business owners overlook this question and start spending with the expectation that it will be deducted. As the IRS explained, anything that is suitable for business is tax deductible. This includes the expenses a business has to make for effective business operations like office inventory, supplies payroll, etc. Nondeductible expenses include campaign expenses, business fees and license, home phone line, credit card fees, fines and penalties, seminars, unnecessary business trips and much more.
- How Current Expenses Differ From Capital Expenses?
The tax deductions timing based partly on whether you count an expense as current or capital. Current expenses are daily business expenses and include rent, electricity bills, stationary, telephone, office repair, payroll, transportation and courier payments. Current expenses can be calculated as subtracting all current expenses from the business’ gross income during the tax year.
Capital expenses are business asset purchases and rules for deducting capital expenses are little complex. A capital asset includes building, equipments, and vehicles. These must be written off over their useful life usually over the period of 3, 5, or 7 years, according to IRS rules.
- What’s The Difference between Independent Contractors and Employees?
Independent contractors usually have their own small business and they offer services to many. And unlike employees, they don’t explain jobs to contractors. Independent contractors also receive full payments for services. Unlike employees, the owner doesn’t need to hold back taxes, or offer other settlements.
- Does Home Office Is Tax Deductible?
This question has two different angles: one you use office solely for office work and second you use it for personal and office work as well. In order to check whether is your home office is tax deductible or not, asks your tax attorney to help you in this regard. However, if you do qualify for deductions, you can deduct things like part of your home rent, house utilities, and insurance expenses.
- Does Incorporation Warrant Tax Break?
A corporation can have several tax advantages. As an incorporated business, you should take help from an attorney or tax professional to organize a tax structure that best suited for your business to get the most out of those advantages. Proper structured management of salaries and profits can save you thousands of dollars yearly. Corporations that are profitable from year to year can easily gain from the tax break.
Moreover, corporations also have the choice of keeping some profits within the corporation to take benefit of the lower corporate tax bracket. Though, many business owners don’t want to avail that option because their businesses haven’t shown the capacity to preserve a stable profit. You also have to see about the costs of incorporating because you will need to preserve your incorporated taxes as well.
- Should You File Tax Yourself?
In initial business stages it’s credible, but in later stages you should take help from a tax attorney to help you understand the big picture for a short time. You can also invest in a sound bookkeeping program as well. After your business go profitable, it’s better to hire a tax professional to ensure everything is controlled and in order.
- What Biggest Tax Mistakes You Are Making?
The most common tax mistakes includes not remembering to sign the tax return, jumbling the bank account number or using a moniker instead of actual name on a Social Security card (SSC). There are quite a few mistakes that smart people – even those who hire a tax professional makes are unconformity in receipts and expenses, merging business and personal funds, bad bookkeeping management and not overlooking available deductions.
- How To Simplify Tax Filing Next Year?
Simplifying tax filing can be made by reflecting on big issues on like what complicates the process for you, which ambiguities needs to be resolved, should tax exemptions be extended or eradicated. Some research and genuine efforts can help reduce the burden and save you time and money for the future filing. Use applications and online software’s that can assist you in keeping track of your expenses and receipts. Take help of a tax attorney in dealing with upcoming tax year intelligently.