Running a small business right now may feel very stressful with the economy in the state it is in. How will your company make it through these difficult times? There are many aspects of running a business and all of them demand the right amount of attention. One of these aspects is your business’s tax liabilities. For many small businesses, tax liabilities are not noticed until it is too late. A number of tax liability situations can be avoided which will help your business move better through these difficult times. Mark Dicus & Company will share tips of reducing tax liabilities for your business.
List of Legal Tax Deductions
Nothing can get you in bigger trouble with the IRS than accidentally making illegal tax deductions. It is important to know which deductions are legal and applies to your business. Following is a list of some examples of legal tax deductions for small businesses. See if they apply to your business.
• Automobile maintenance, and fuel coverage for vehicles used for business activities.
• Cell phone bills paid for the use of business needs.
• Mortgage, rent, or utilities used for the operation of the business.
• Up to 50% of meals or entertainment costs can be tax deductible if these expenses are for hosting partners, clients, or employees.
• The expense of operational equipment such as computer, equipment and more can also be legally used as a tax deduction.
• Setting up and or contributing to a retirement plan.
Wise Investments & Purchases
When making investments or purchasing items for your business it important to make sure they are beneficial and essential. The items as well as the time can have an effect on your tax liabilities for the following year. To help prevent tax liabilities it is often recommended to avoid major investments during the last quarter of the year. If possible, major investments should be acquired at the beginning of the year as it make tax deductions much easier to calculate and prepare for the end of year taxes.
Avoid Tax Audits
When exploring different avenues to reduce your taxes, make sure you do not set yourself up for a tax audit. The IRS is often looking for any suspicious deductions when filing your taxes, and the IRS will not hesitate to place audits on your business. The IRS has begun looking closer on sole proprietors, LLCs, small partnerships and S corporations tax deductions. Some of the tax deductions they tend to look at closely are deductions for meals, travel, entertainment, automobile maintenance and fueling, as well as real estate losses. Too many businesses were hoping to undermine the IRS and now they are being caught. As all of these tax deductions are legal, they truly must be used correctly. A business can quickly fail due to tax audits. For smaller business owners who are unsure about which tax deductions their business qualifies for, you can always seek out a professional accounting service.