Three Essential Tips to Handling Your Small Business’ Taxes
February 2015

Owning a small business or being self-employed is a lot of work, and that’s before it comes to filing taxes. Small business owners and the self-employed can make tax time easier by following just a few essential tips:


1.       Good records: keep them separate; keep them safe.

Keeping good records is the foundation for everything else: a taxpayer can’t deduct what they haven’t documented. Good recordkeeping begins with tracking all income, saving receipts and documenting income and expenses. Having separate, business-only bank accounts will also make it easier to keep good records and file accurate tax returns. Finally, secure digital and paper records and back them up often.


2.       Know tax requirements

Owning a small business or being self-employed means new tax requirements and tax forms.

If someone owes taxes on income that isn't subject to withholding, they likely will need to make quarterly estimated tax payments. Also, if a small business owner has employees, the owner must pay employment taxes, including unemployment tax and Social Security and Medicare taxes. In addition, they must withhold and remit federal income tax and the employee portion of Social Security and Medicare taxes.

Most self-employed individuals and sole proprietors report their income and expenses on Schedule C or Schedule C-EZ and are required to compute self-employment tax on Schedule SE if they earn at least $400 from the business.


3.       Deduct eligible expenses

A deductible business expense must be both ordinary and necessary. That means it must be common and accepted as well as helpful and appropriate for the trade or business. If a business owner or self-employed taxpayer uses part of their home exclusively and regularly for business, some mortgage, utility, tax and insurance expenses may be deductible. For the second year, taxpayers can use a new and simpler calculation of $5 per square foot for a maximum of 300 square feet. They can also deduct certain car expenses when they use their car for business purposes using either the actual expense method or the standard mileage rate of 56 cents.

If a taxpayer isn’t comfortable preparing their business’ taxes, or is too busy running the business to spend the time filling out tax forms, they may want to use a tax professional to help them meet all their requirements and get them all the tax benefits they’re entitled to. The cost of tax preparation may even be a deductible expense. When choosing a tax professional, make sure they:

-          have up-to-date and ongoing training,

-          have expertise in small business and self-employed tax requirements and benefits,

-          guarantee their work and

-          are available year-round.

Taxpayers, especially small business owners and the self-employed, really need to make sure they're doing everything they can to get all the credits and deductions they're entitled to and meeting all their obligations. Seeing the right tax professional will help simplify the tax season and help get the taxpayer the money they’re due.

 

Rey Alabre’s contact info is listed below for more information.

Office Address: Bridgeport H&R Block 1375 Madison Ave. Bridgeport CT 06606

Office Phone Number: 203-908-3309

reynold.alabre@hrblock.com