Taxes are one of the most complicated parts of running a business, and many business owners see tax preparation as a nightmare. Still, they must find ways to file taxes accurately and save more by reducing their tax liability.
Like many other new business owners, if you are also not sure about your tax deductions or not paying attention to such opportunities, you are missing out on a lot of value.
To get a better understanding of your tax deductions, check these helpful tax write-off tips shared by industry experts:
Bowen Khong, founder and CEO of ForexToStocks
When your firm is profitable, and you have children capable of performing routine and necessary chores for your business, now is a fantastic moment to grow money for your children tax-free. There are no payroll taxes to pay if you elect to put your children on payroll. You don’t have to file a tax return if you pay your child up to the standard deduction of $12,400. As a business owner, you can now deduct $12,400 for placing your child on payroll without submitting a tax return and without paying payroll taxes. You can also set up a Roth IRA for your children, put them on payroll, and finance the Roth IRA through payroll on the backend. This is a means for your children to grow their money in the market tax-free.
Figuring out the best way to create income and coming up with a plan to keep them tax-free is an excellent way to make the tax law work in your favor. Make sure you consult an expert so that you know all your possible legal options to do this.
Erin Stone, Business Owner, Hinterland co.
The home office write-off often goes unnoticed, especially by new small business owners. But it can really help defray your tax liability. Just make sure that you qualify. The rules surrounding qualification recently became much simpler, as did how much you can claim for the write-off. Consult the IRS website for details on qualification and how to claim it. An initial qualifier, although it may go without saying, is that your small business is based out of your home.
Gail Rosen, CPA, PC
Starting with the tax year 2018, a new law passed that allows a new 20 percent tax deduction on your QBI (Qualified Business Income) that reduces your taxable income. There are many provisions that change your eligibility for this deduction, including what type of service you offer, your income level, wages you pay, and/or assets you own. This is one example of the benefit for freelancers working with an experienced tax professional.
Perry Zheng, CEO & Founder of Cashflowportal
Small businesses get massive leverage when it comes to paying taxes for their insurance. All business expenses, including the owner’s insurance policy, malpractice protection, flood insurance, cyber liability coverage, and business continuity insurance, are entirely deductible. However, when it comes to health insurance, there are two things to keep in mind. A small business may be entitled to a tax credit of up to 50% of employee premiums paid. Furthermore, health insurance premiums for self-employed individuals and shareholders who possess more than 5% of a corporation are not deductible as a business expense. Instead, the insurance premiums are deducted from the owner’s tax return.
Sep Niakan, Managing Broker
A vehicle, such as a car, light truck, or van, is used by the majority of enterprises. Only deduct the expense of operating the car for business if you have records to substantiate it was used for that purpose. Instead of deducting your actual outlays, you can eliminate the need to keep track of specific costs (e.g.., gasoline, oil changes) by relying on the IRS’s standard mileage rate. You must keep track of how many miles you drove and for what purpose, whether you deduct real expenditures or utilize the standard mileage rate per mile driven.
Darren Nix, Founder of Steadily Landlord Insurance
One of the most valuable tax write-offs you could make include deductions on your home office. With many businesses in tech or even working remotely, this could save you a significant amount of money.
Be careful though, I know an accountant who told me that the definition for a home office is rather strict, and there are many criteria. One of these is that the home office cannot have a TV. While having a home office could be a tax write off you do not want to be in trouble with the IRS.
Tax deductions are important to minimize the amount of tax you have to pay, and accurate financial records help you know what to write off and what not while keeping you away from IRS penalties.
If you don’t have enough knowledge of taxes, especially business taxes, it’s always best to hire tax accounting services to save time, money and keep the tax-filing stress away.