5 Tax Tips Every Small Business Owner Should Know

Our firm does not do taxes, although I did them for 12 years. When I started my practice, that was a service I just didn’t want to offer. However, we partner with CPAs and other tax professionals to ensure that the guidance we provide to our clients is in line with the advice their tax professional provides.

As part of that guide, there are some tax advantages that most business owners don’t know about or simply don’t take advantage of. There are also some “deductions” that should be avoided due to wrong tax information. Here is a list of the five most common.

Track all expenses consistently

Track all your expenses, including those you pay personally. Business owners always ask me “what about the things I paid for with my personal credit card?” Yes, everything is deductible; you just need to get it in the accounting records and account for it. Keep in mind that the credit card is personal, so don’t add that account to your chart of accounts. They will count as contributions from the owner or shareholder. TIP: Record these charges monthly so you don’t forget them at the end of the year.

Avoid money leaks

As a small business owner, you are sometimes faced with cash flow problems. As a result, he falls behind on his bills and taxes. While your provider may not assess late fees, you better believe the IRS will in the form of penalties and interest. And these my friend are not deductible. No, not even the interesting part. TIP: Plug this money drain by paying your taxes on time and use those funds for a deductible expense.

Maximize retirement contributions

Most small business owners are so busy working on their businesses that they never stop to think about what they will do once they retire. I’m not even sure you’re thinking of retiring. But the fact is, you will, someday. So you have to make sure you have some kind of savings. There are several retirement plan options that will allow you to set aside some tax-free funds for your retirement, and they are all tax-deductible for the business. Yes, you can have your own company retirement plan. Cool right? TIP: Contact your tax advisor and financial advisor to discuss retirement plan options.

Expenses paid personally

I can’t say it enough: stop mixing your personal expenses through the business. They are not tax deductible and we accountants know when you are trying to. Believe it or not, we are smarter than the average bear. TIP: Do not mix.

location 179

The IRS allows you to expense the purchase of a major fixed asset in the first year instead of depreciating it, as long as you meet certain requirements. You can deduct up to $500,000 and reduce your taxable income to zero. TIP: If you can, don’t buy any equipment until December so you can buy enough and not too much.

What tax tips have you used to help keep more money in your business?