Here’s a QuickStart guide and a list of Resources to help small business owners. You can get caught up with the latest tax laws and regulations. Plus learn how to effectively organize your tax records and avoid tax scams.
These strategies help manage taxes, stay organized, and avoid tax scams:
Managing Taxes:
- Accurate Recordkeeping: Tracking all business-related expenses and income throughout the year makes life easier when it’s time to file your taxes.
- Available Deductions: Become familiar with tax deductions your business qualifies for, like home office expenses, vehicle expenses, and business travel expenses.
- When to Hire a Professional: Tax professionals can help you file your taxes and take advantage of all available deductions.
Determining Whether the Individuals Providing Services are Employees or Independent Contractors
How can I stay organized for tax season as a small business owner?
- Accounting or Tax Software: The proper software can simplify your bookkeeping and the tax filing process.
- A Good Filing System: Keeping your tax-related documents in one place, organized by year is very helpful.
- Set Early Reminders: Set reminders prior to tax deadlines so you’re not rushed with tax-related tasks.
How can I Avoid Tax Break Scams?
- See Red Flags: Common tax scams include phishing emails, fake charities, and identity theft.
- Secure Your Information: Avoid sharing sensitive business or personal information over email or phone.
- Understand Trustworthiness: Verify the legitimacy of entities by requesting information before sharing any sensitive data.
Here are some well-known and trusted sources for Small Businesses looking for more information about managing their taxes:
- IRS Small Business and Self-Employed Tax Center:
- Small Business Administration: Tax Resources:
- National Federation of Independent Business: Tax Resource Center:
- Federal Trade Commission: Tax Identity Theft Awareness Week:
If you’re worried you’ve forgotten to include something in your tax records, or not sure about how to get started with your recordkeeping, you’ll want to pick up a copy of Small Business Taxes Made Easy, today.
We make no commissions on this book, but:
Recommended since 2005; with classes already into 2024 Eva Rosenberg’s Small Business Taxes Made Easy is a comprehensive guidebook with a conversational tone to make complex tax laws easier to understand. We think it’s a winner!
Eva Rosenberg has written a wonderful handbook for both new and veteran small businesses. She covers everything from home office deductions to hiring employees. She warns you when something may cause an audit, and how to keep your papers organized so you not only have a back-up to prove your deductions, but so you don’t miss important tax deductions. She talks about the pros and cons of hiring family, and shares resources a plenty. But what I like best about her book, besides the fact that she steers clear of tax-break scams, is the fact that she writes in a conversational tone which makes it easy to understand some of the more complex tax laws.
By Eva Rosenberg http://taxmama.com
Small Business Taxes Made Easy, Fourth Edition Paperback – March 27, 2020
TAXMAMA’S EA EXAM CLASSES 2023-2024
EARLY-BIRD PRICING IS IN EFFECT NOW!
The information provided in this post can be useful for small business owners who are looking for resources to manage their taxes effectively. We always recommend consulting with a tax professional for personalized advice about managing your business taxes.
What are Some Common Small Business Tax Deductions?
- home office expenses
- business related vehicle expenses
- business travel expenses,
- office rent
- office supplies
– often included are:
Coffee, a microwave, toilet paper, some feminine hygiene products.
What Tax Forms are Required for Small Businesses
Naturally, the tax forms required for small businesses vary depending on many factors but, here are some of the most common tax forms small businesses may need to file:
Form 1040 or 1040-SR (current revisions and instructions): Sole proprietors, single-member LLCs, and some partnerships report business income and expenses on their personal tax returns using Form 1040 or 1040-SR.
Form 1120 (current revision 2022) Corporations must file Form 1120 to report their income and expenses.
Form 1065 (revised 2022) Partnerships must file Form 1065 to report their income and expenses, as well as the share of each partner in the partnership’s income and expenses.
Form 1099 (revised annually): Businesses that pay independent contractors $600 or more in a year must provide them with a Form 1099-MISC or Form 1099-NEC and file a copy with the IRS.
IRS Form 941 (revised 2023): Employers must file Form 941 to report their quarterly payroll taxes, including federal income tax, Social Security tax, and Medicare tax.
Most Tax Software and tax professionals including Tax attorneys can help you determine the specific tax forms necessary for your business.
What are the Different Types of Corporations and Which One Saves More on Taxes?
Business taxes saved will depend on many factors, including the business structure, industry, and other specifics but, S-Corps and LLCs may offer some additional tax advantages compared to a Sole Proprietor or a C-Corp.
Sole Proprietors
Sole Proprietors are not “incorporated” but are subject to self-employment taxes, which include Social Security and Medicare taxes. They are taxed similar to an independent contractor.
S-Corps and LLCs
S-Corps and LLCs are considered pass-through entities, whereas the profits and losses of the business are passed through to their personal tax returns. This may allow S-Corps and LLCs to avoid double taxation on business profits.
C-Corps
C-Corps are considered separate entities (beyond your individual taxes) and therefore subject to corporate income tax at the corporate tax rate and may also be subject to taxes on dividends paid to shareholders.
Tax advantages vary greatly depending on the specifics of your business. If you have a complex structure, it’s best to consult with a tax lawyer or financial advisor to determine the most tax-efficient structure for your business.
What Do People Mean When They Say “Tax Shelter”?
“Tax shelters,” are typically an investment or financial tool that reduces the taxable income or tax liability for either an individual or a business.
An example of a Tax shelter could be investments in retirement accounts, like Individual Retirement Accounts (IRAs) or 401(k) plans, which offer tax-deferred growth. In many cases the contributions are deducted from your taxable income. Other examples are investments in real estate, like rental properties, which may allow for deductions on mortgage interest, property taxes, and depreciation.
Not All Tax Shelters Are Legal
Some tax shelters are considered abusive tax shelters by the IRS and are therefore illegal. The IRS has strict rules about tax shelters, and individuals or businesses who engage in abusive tax shelters could face penalties and other legal consequences.
What’s an Example of an Abusive Tax Shelter?
An illegal or abusive tax shelter is a type of investment or financial arrangement designed to artificially lower your taxes. These methods are illegal and violate tax laws. One example of an abusive tax shelter is called a “micro-captive insurance” scheme. This is when a small business owner creates a captive insurance company to insure against certain risks, but is set up in a way to claim unwarranted tax deductions.
If You’re Thinking About Tax Shelters You Should Get a lawyer
Tax benefits that seem too good to be true usually are. Be cautious of tax shelters, it’s probably not a good idea to even consider it. Consult with an IRS Tax Lawyer to ensure that your business investments are legal and complies with the tax laws and regulations.