Business Tax Help
Professional business tax help is available for those seeking to start new enterprises. Going into business sounds like an exciting venture and a chance to be your own boss. But if fledgling entrepreneurs are not prepared for the long hours, mounds of paperwork, tons of bookkeeping, and fiscal accountability, staying on a 9-to-5 job might be a better option. Most new owners won't have much trouble making money, but keeping it can be a problem; especially after paying suppliers, employees, and last but not least, taxes. Uncle Sam will have his hand out; and owners will need professional help to avoid incurring late penalties and excessive interest payments for delinquent tax obligations.
Entrepreneurship is not for the weak at heart, but with proper preparation and expert accounting, new owners can realize a lifelong dream and a measure of profitability. The Small Business Administration (SBA) website offers links to resources for business tax help and seeks to pair new owners with experienced entrepreneurs in similar fields. New owners should never be afraid to ask for wisdom, either from veteran entrepreneurs or revenue professionals. "Get wisdom, get understanding: forget it not; neither decline from the words of my mouth. Forsake her not, and she shall preserve thee: love her, and she shall keep thee. Wisdom is the principal thing; therefore get wisdom: and with all thy getting get understanding. Exalt her and she shall promote thee: she shall bring thee to honour, when thou dost embrace her" (Proverbs 4:5-8).
The first step in small business tax preparation is to determine which type of entity is applicable for specific owners. Companies can be formed as sole proprietorships with a single owner; as partnerships involving more than one owner; or as a corporation (or C-corporation) established as a separate entity to avoid liability of a group of individual owners. S-corporations are also formed by several co-owners but taxed at the same rate as individual taxpayers. Similar to partnerships, limited liability companies (LLC) are owned by several co-owners or members, but the liability of each member is limited to their investment in the LLC. For the purposes of clarity and abbreviation, this article addresses business tax help for sole proprietorships.
Sole proprietors carry the lone responsibility for the company, including profit and loss, tax liability, insurance, employee and contractor compensation, and overhead. Sole proprietors are required to file certain taxes and reports in keeping with the federal and state Department of Labor laws. To comply with U.S. Department of Labor regulations and those of a particular state, novice entrepreneurs can log onto DOL websites or visit a local state office. Owners can also browse www.dol.compliance for updates on employer workplace responsibilities and certain revenue issues. DOL representatives may also offer business tax help relevant to filing required employer payroll forms and quarterly reports. Representatives are on hand specifically to assist owners in computing and filing accurate employer reports and complying with labor laws.
Aside from filing self employment taxes on a quarterly basis, sole proprietors must also file federal and state income returns. An owner's income is determined by the net profit and loss realized from the venture. The total net profit or loss is entered on Form 1040 as income. To verify a company's net income, sole proprietors are required to submit Schedule C, Profit or Loss from Business, along with their Form 1040 Federal Income Tax return. Schedule C enables the Internal Revenue Service to review income earnings and expenditures. Sole proprietors should keep accurate receipts, payroll records, expense reports, and checkbook balances throughout the year to ease the process of small business tax preparation. Essentially an accounting balance sheet, Schedule C includes spaces for owners to fill in income and expense information and should be an accurate reflection of all business activity throughout the preceding year taxes are filed. Gross income is computed by adding gross receipts or sales and subtracting returns, allowances, and the cost of goods sold.
Essential to small business tax preparation is tabulating all expenses associated with running an enterprise. Promotional advertising; car and truck expense, such as gas and oil; commissions and fees paid to salespeople, contract labor for independent contractors and subcontractors, and depletion must all be tabulated. Schedule C should also reflect depreciation of major tools and equipment; monies paid out of employee benefit programs; insurance other than health, which would include General Liability and Workers Compensation; legal and professional services; and office expense. In addition to all of these items, if employee pension and profit-sharing plans, such as 401ks or IRAs, were owner-provided, these figures need to appear on the Schedule C; along with the amount of office rent or lease, repairs and maintenance, and supplies. Also included are taxes and licenses, travel, deductible meals and entertainment, wages, less employment credits, and other expenses.
Once receipts for all expenditures and account receivables have been tabulated to arrive at the gross income, owners can either tackle filling out the Profit and Loss statement themselves or solicit the services of a small business tax preparation agency. A good idea is to simply add up income and expense figures based on the Schedule C and take the tabulated figures to a Certified Public Accountant (CPA), tax preparer, or bookkeeper. The advantage to using professional business tax help is that a certified preparer or CPA will be familiar with the latest credits and deductions, regulations, and filing requirements imposed by federal and state governments. Additionally, many preparers can file returns electronically. If an owner is fortunate enough to get a refund, e-filing is faster than waiting months for a check. A word of advice to novice business owners: for at least the first year of operating an enterprise, don't try to handle small business tax preparation alone. Local SBA offices, U.S. and state Department of Labor offices, and independent preparers are all available to assist budding and accomplished owners comply with the regs and keep Uncle Sam happy.
Small Business Tax AdviceFor those running small enterprises, small business tax advice is invaluable to prevent errors and ensure compliance issues are resolved. Advice can be found through local accountants nearby, or through the small business administration in the town where work activity is conducted. No owner should begin operations until all taxable issues are understood, and a good relationship has been established with the accountant or CPA. These professionals have an abundance of advice on what deductions and home business tax write offs can be taken, saving perhaps thousands of dollars.
Many entrepreneurs may not realize that how a business is structured can either save taxes or not. Small business tax advice can advise the new owner on how to structure the entity as an S-corporation, a partnership or an LLC. Each type of structure is taxed differently. Not only is choosing the correct structure important, but so is understanding what types of income are taxable and non-taxable. There are various types of income from capital, property, money or non-tangible services. An owner doesn't even have to physically possess the income to be taxed on it. Some people have third parties or agents receive the income. Generally the income is taxed at the time it is received, no matter who receives it on behalf of the individual. However, if a service is performed in one year, but the payment isn't received until the following year, then the tax would apply on the following year.
Some people may not understand, before getting small business tax advice, that there are also various types of compensation, other than salaries, commissions and bonuses. There are companies who give out stock options as a benefit and this too is taxable income. Other types of benefits are considered "fringe" such as being given something tangible like a membership to a fitness club in exchange for services performed. These too are taxable. Digressing a bit, let us revisit the type of entity structures and their taxable basis. S-corporations and Partnerships are not taxable entities. All the income, deductions etc are passed through to the shareholders or partners and are reported on individual tax returns. The owner must report earnings on a 1065 form.
If owners are considering taking home business tax write offs, be sure to first check with an accountant before doing so. The IRS is particular about some deductions, such as home office write offs. Jesus taught that Christians should pay taxes. The Pharisees wanted to know if tribute, or taxes (money) should be given to Caesar. Jesus said "Render therefore unto Caesar, the things which are Caesars; and unto God the things which are God's" (Matthew 22:21 KJV). The home office must be used exclusively for work. If any part of the room is used for any purpose other than work, then the deduction cannot be taken. However, mileage can be deducted when out running errands, but only for the first mile. So be sure to keep good records. If any type of renovation is done on the home office however, those improvements can be taken as tax deductions. Also, a portion of the mortgage or rent can be written off - just figure out the square footage of the home office, divide that by the total square footage of the house to get the percent area. Then multiply the percent area by the amount of the mortgage to get the amount of mortgage payment to be written off. Small business tax advice can be invaluable here.
Some other deductions such as capital equipment used in running the business have experienced a large increase for this year. The deduction for capital equipment went up to $250,000, more than double the amount in 2007. Also, instead of the traditional depreciation schedule, deducting only 10% per year, for example, up to 5% of the value of the equipment can be deducted for the first year, and then the normal amount in ensuing years. The above capital equipment depreciation amounts were put into effect for 2008 as a part of the stimulus package to help give the American economy a big boost, so it won't last past this year. Owners would be very wise to take advantage of it! In this scenario, home tax write-offs will pay off big!
Other types of home business tax write offs are any office supplies purchased for use in the work, internet provider costs if work is done over the internet, phone provider costs, even utilities such as electricity. Don't forget about the computer, paper, shelves, desks, chairs and lights! If a copier is used, that too can be taken off of taxes. Meal times can be deducted also, whether in or outside the home. Even taxes can be deducted from taxes if they are related to the business. The cost of doing business can be taken off of taxes too, such as the cost of insurance, the interest on loans, and any salaries the company pays to its employees.
So one can see how very important it is to carefully consider home tax write offs when working. Just be sure to keep very careful and neat records such as collecting and filing receipts, keeping logs of mileage and other expenses the tax advisor may suggest. Staying organized can mean the difference in whether or not all those deductions end up on the return, or stuffed somewhere between the cushions of the couch or under a chair! Savvy owners understand the need to keep careful accounting of all aspects of work so that if ever an audit is conducted, the whole process will run smoothly and quickly. Lose receipts and the owner may face more than just embarrassment! Keep the accountant close that provides small business tax advise, and always remain ever watchful regarding those home business tax write offs!