SMALL BUSINESS TAX DEDUCTIONSGet A Pay Raise NowYour Small Business Tax Deductions effect your payroll taxes immediately. Give yourself a Pay Raise Now.
Could you use an extra $200.00 or more a month? With the economy in a slump, the extra cash is sure to help. If you are still working and have not Retired yet take advantage of the Small Business Tax Deductions by starting your Retirement Business now. The United States is very business friendly, the IRS tax system is set up to help business owners. This includes Home Businesses. If your goal is to make money then you can take the Small Business Tax Deductions. Simplified Employee Pension is an advantage of self-employment, you can put away $45,000 all tax deductible money. If over 50 you can put $5,000 additional into a 401 (K) as "Catch-up" contributions. You are only taxed on the profit your business earns. Most business do not show a profit right away so there would not be any taxes too pay. What are the Small Business Tax Deductions you can take? 1. Home Office Do not fear this triggering an audit, there are millions of home businesses and the IRS does not automatically audit. Be sure you use the IRS definition of a home office. It has to be a room or space used for your business and nothing else. If your office shares space with a bedroom you need to figure just how much of the space is the office. This equation works for a separate room also. Measure the office area and divide by the square footage of your home. This gives you the percentage of your home-related business expenses. Which includes either rent or mortgage, insurance, property taxes, utilities and repairs to your home. If you have a separate room and redo the room as an office you can deduct the expenses you incurred setting up the room as a home office. The IRS does not allow your computer if it is the only one in the home and others use it. If it is only used by you then it is fully deductible. That includes all components also.
2. Office Supplies All of your business supplies are deductible. Be sure you keep all of your receipts.
3. Office Furniture All office furniture is deductible in one of two ways. You can either deduct the entire amount the year of purchase or over a 7 year period this is a depreciation. If you depreciate be sure to use the IRS charts, each year the amount will be different. Read the IRS booklet on Small Business Tax Deductions it gives full directions on figuring which way to go. 4. Office Equipment Computers, printers, fax machine, scanner, and any other equipment you use in your business can be deducted the year of purchase or depreciated. 5. Software and Subscriptions As of 2008, you can deduct the full cost in the purchase year.
6. Mileage The IRS requires documentation of business miles. A small mileage log book is perfect for this. They usually have a page for repairs and up-keep also. Insurance is also figured in.When ever you are driving for business write the date, starting and ending mileage, toll fees, parking costs and reason for the trip. The mileage rate for 2008 is 50.5 cents per mile. You can figure your deduction in two ways. Total the mileage then add tolls and parking. Multiply the total by 50.5 cents for 2008. Or deduct your business mileage from personal driving and deduct that portion of auto-related expenses. Do not forget to include fuel, repairs, tires, insurance and tags. If you are making payments then figure in the loan interest and auto depreciation. If you have one vehicle that you use exclusively for business then the total auto-related expenses can be deducted.
7. Travel, Meals, Entertainment and Gifts All travel costs, hotel, air fair, taxi, car rental, tipping and any other travel related expense is fully deductible. The only thing that is not 100% deductible are meals. You can deduct 50% of the cost of meals. When not traveling the only way you can deduct meals (50%) is when you have a business lunch and discuss business during lunch. Client entertainment is also figures at 50%. Client and employee gifts are fully deductible up to $25.00 per person per year.
8. Telephone Charges If you have a separate business number from your home number then all charges are deductible. You can only deduct your business calls from your home phone. A cell phone is figured the same way. 9. Insurance Premiums If you do not have insurance coverage from another source, your full premium is deductible. The deductible can not be more than your business net profits. 10. Social Security You have to pay double the amount of Social Security, you pay both the employer and employee contributions. The amount is 15.3% of net profits. You then deduct half of the contribution on your 1040 tax form.
11. Retirement Contributions You deduct these contributions from your personal income tax. 12. Hiring If you hirer an Attorney, CPA or anyone else their fees are tax deductible also. Be sure you keep all of your receipts so you can take full advantage of all the Small Business Tax Deductions.
How Do You Increase Your Current Take Home Pay? Was your tax return over $1,000.00 last year? If so you over paid taxes every month. Each exemption you claim in 2008 is a $3,500.00 credit. Total your business expenses, this is a projected amount. We will use $7,000.00 as an example. That would allow you 2 more exemption on your W-4. Depending on your income and tax bracket you could add $100.00 plus take home each pay period. You would still have the tax return check unless you figured in another exemption. Which would lower the return amount. The majority of us get a tax return each year because we over pay our taxes each pay period. The government does not pay us interest on the over paid amount but charges us interest if not paid on time. Why not save the amount being over paid and earn interest on it? Buy increasing W-4 exemptions your take home pay increases a couple hundred a month or more. An extra $2,400.00 a year into savings or paying down loans or credit cards will add up and increase your retirement funds. Small Business Tax Deductions can increase your income from a current job by using the amount to figure exemptions. The only way you can legally take advantage of the Small Business Tax Deductions is by starting your business and not deciding half way through the year to discontinue the business.Doing that will more than likely trigger an audit.
The IRS Small Business Tax Deductions are worth the time it takes to keep records. When you do not keep these organized you cause yourself a lot of undue stress. A few years ago a friend of mine was audited and his records were less than a 10 year old could keep. The guy is really very inventive at times, so before the tax man came he went out and purchased a couple of new trash cans. He then took all his receipts and dumped them in one can. The other can he dumped his client files in. Everything was in these cans in his office. He moved out the file cabinet. So when the Tax man arrived and wanted to go through his files he showed him where they were. The poor man was dumb founded. He started looking through the receipts and my friend handed him a few empty file boxes and said as long as he was sorting could he put them in the correct boxes? The man was shocked by the request. This ploy worked the Tax man left with in the hour and told him he approved his tax filing. I would not try this but thought it was funny. Keep your records in a file and organized. The advantages of Small Business Tax Deductions will more than likely pay you nicely for doing so.
Be sure you discuss Small Business Tax Deductions with your CPA or accountant. I am neither and only passing on what I know personally from my own business accounting.
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