Handling your taxes is not a simple thing, even when it comes to running your household, however, when it comes to doing the same thing for your business, things become a tad more complex. First of all, a fortune is getting wasted by taxpayers in unclaimed deductions and benefits, in fact, there are some instances where small business owners reapply for loans over and over again, while they have all this money (their money) lying dormant and unclaimed. With that in mind and without further ado, here are the top five tax tips that your startup business desperately needs.
1. Determine ownership structure
The first thing you need to take into consideration is the importance of having the right ownership structure for your business. The tax scheme according to which you pay is determined by it. You see, a sole proprietorship, partnership or limited liability company (LLC) doesn’t pay taxes according to the same structure. There’s also a difference in liability and the majority of experts agree that running as a sole proprietorship isn’t the best of ideas. Why? Well, mostly because it’s impossible to separate your business from personal accounts.
2. Home office deductions
The next thing you need to understand is the fact that if you’re running a business from home, you might be able to deduct a number of household bills as business expenses. For instance, if your home office takes about 10 percent of your home’s surface, you might be able to get 10 percent off from your utility bill. In order for this to work, nonetheless, you need to have a single-purpose room as your office. This means that a bedroom office or a closet office is out of the question. If that was possible, everyone would keep their office in the largest room of their home (which is usually a living room), which is why this law exists to protect the tax model from such abuse.
3. Tax depreciation
A lot of asset types lose value over the course of time, which means that paying the same amount in taxes for them makes no sense. This is why tax depreciation exists and allows you to claim a substantial amount of resources that could be better used elsewhere. The problem with tax depreciation stems from the fact that the surveying and managing schedules aren’t simple tasks. This is why you need a professional to handle your tax depreciation scheduling. Outsourcing this task would, therefore, be a great idea.
4. Payroll taxes
Your payroll taxes aren’t a simple matter either. First of all, you need to know what qualifies as income to the IRS, which is why you need to start off with some research on the topic. Second, you need to ensure that your employees are classified correctly and that all your payments arrive on time. Lastly, you need to inquire about which expense accounts are taxable. Once you have this out of the way, the rest is easy.
5. Outsource your accounting
The last piece of advice that you need to hear is the fact that similarly to tax depreciation, the issues of your taxes are best left to professionals. There are so many advantages, benefits and deductions that you aren’t even aware that you’re eligible for and using this advantage may be what you need in order to gain a much-needed competitive edge. So, try doing what the rest of the industry is doing and outsource your accounting.
The last piece of advice that you need to hear is the fact that doing your business and personal taxes separately is the best course of action. Also, just because you’re already doing your household taxes, this doesn’t mean that you have what it takes to handle them for your business, as well.