Taxes are scary; this is true irrespective of whether you are a small, mid- size, or large business. It is complicated and time consuming, which is why most business owners prefer to use the services of tax professionals or software. Smart move, however small business bookkeeping gurus say that as a business owner, it is always in your best interests to have a basic understanding of taxes. One reason to learn more about your taxes is that you can figure out ways to save money spent on taxes, legitimate ways of course.
- Home Office Deductions– Most small business owners run their businesses out of their homes, but they hesitate to claim home office deductions. Why? Simply because they are not sure if they will be able to pass an audit. It is quite easy actually; here is what you can do to prove that you have a legit home office.
- Maintain up- to- date and well kept records. Invest in a small business bookkeeping company if you need help with your books.
- Maintain separate office space, that isn’t in any way used as personal or family space.
- If you have only one computer at home, auditors might not believe that it is solely meant for work. You can either maintain separate computers or not have a computer in your work area.
- Technology Deductions– Science and technology is changing the world. Every day there is something out there that demands your attention, that promises to make your work quicker and more efficient, including small business bookkeeping. Science and technology is changing the way businesses work, fortunately the government also understands this, which is why under Section 179 of the tax code, expenses for equipment like computers, business software etc are tax- deductible up to a certain amount. The amount varies every year, so make sure you check Section 179 come tax time.
- Travel Deductions– A growing business often requires travelling for conferences, investment meetings; all directly linked to the development of your business. So while your travel costs for business trips are tax- deductible to a certain extent, you need to remember the following-
- Food is only deductible up to 50%.
- While you can take your family, only your costs can be calculated for tax deduction.
- Only conferences that are directly useful to your business or industry will be considered for tax deduction.
Never forget the golden rules of small business bookkeeping- maintain up- to- date records and store away all your receipts and invoices. Taxes and audits are unpleasant, but are essential and in your best interests. So fill your taxes on time, maintain well organized records and you will have nothing to worry about.