It’s never too late, or too early, to prepare for tax season. Starting now will help you figure out what you can claim and deduct. Business owners will begin going through their accounts to make sure all of the numbers add up and see which expenses they will be able to deduct. Getting ready for the upcoming tax season will allow you to reduce the stress that comes with doing your taxes and take a look at your business expenses to see how well you did through the year.
As a sole proprietor or LLC, it is extremely important to prepare early because taxes are due on April 15th, just the same as for individual taxpayers. The paperwork is twice as much for business owners as it is for individuals.
As a business owner, you already know that any money you received for goods or services is your income, but this article is going to focus on your business expenses. There are several expenses that you may be able to deduct, at least part of them.
Tax-Related Business Expenses
You can deduct any purchase you made that helps you run your business, as long as you can prove that it. You will need receipts. Here are a few things that may be unclear:
Professional Fees: This is any money that is paid to lawyers, accountants or CPAs and consulting. These are itemized on Schedule C, Legal and Professional Fees.
Car and Truck vs. Travel: If you have to drive for your business, your travel expenses can be deducted under Car and Truck expenses. These include: repairs, insurance, gas, maintenance, and any tolls you may have to pay. If you travel out of your local area for your business, travel expenses such as, airline fees and car rental or taxi charges are deductible.
It is important to know the difference between car and truck expenses and travel expenses. For your vehicle, you can deduct the higher amount of your standard mileage rate or the actual expense.
Contract Labor vs. Wages: Many business owners get confused about this expense. If you send Federal/State, FICA and Medicare taxes to the IRS for someone who works for you, they are considered your employee and will need to fill out a W-2. What you pay your employee is their wages. If your business qualifies for the Work Opportunity Credit, you can reduce your wage amount.
If you hire someone who is under contract, but does not fall under professional fees, you don’t send any taxes to the government. It is the contracted employees responsibility, but you will send them a 1099 MISC form. Whatever you paid that person will be placed under Contract Labor on your Schedule C.
For more help about these, and other business tax deductions, talk to a tax professional.
