According to the US Small Business Administration's
Office of Advocacy, most little businesses face a tax rate of 19.8 percent on an average. That can sum to thousands of dollars in taxes annually— a major ordeal for your average family business.
The uplifting news is, you can implement some little improvements that can have a major effect in your tax bill one year from now. Here are a few tips from the specialists:
1. Keep your business and individual accounts separate
In case your company is not incorporated, you're not required to keep a different bank account for your business, yet specialists advice, it's still a smart thought. Taking care of business and personal costs in various accounts make it less demanding to keep precise records and get ready to document taxes one year from now. Also, in case you're sufficiently unfortunate to be examined, you won't need to deal with your personal transactions. Opening up a different financial account for your business is simple. You can build up a charge card represent your business also, and that will take care of most problems.
2. Use the home office deduction to your advantage
It's no news that taxpayers can get a home office tax deduction by utilizing a part of their home only for business.
There are two approaches to compute the deduction and there is a very simple method. All you have to do is multiply your home office's square footage by $5. On the other hand you can utilize the regular technique, which considers square footage, as well as property taxes, home loan interest or rent, and utilities. Smart business proprietors and entrepreneurs who use a home office take an ideal opportunity to do both estimations, then pick the greatest deduction. This is because the improved technique is capped at a most extreme of 300 square feet — meaning the greatest deduction you could get is $1,500.
Keep in mind that the home office space must be solely for business. You can't consider your lounge or bedroom as a home office.
3. Keep records of the miles driven in business car
Much the same as the home office deduction, there are two approaches to figure the findings for utilization of business cars. The first depends on miles driven, at 54 cents for each mile. The second depends on real costs — including maintenance, repairs, gas, tires, deterioration, insurance and other expenses.
Business proprietors, self employed entities and salesmen ought to keep watchful records of all annual car costs so they can experiment with both counts, and at the end of the day, take the greater deduction.
A simple approach to track travel is by utilizing your smartphone. Most travel applications for iPhone and Android, utilizes GPS to record what number of miles you drove and where you headed to. This makes it simple to make sense of your business car deductions by the end of the year.
4. If you have an open position, consider enlisting a relative
In the event that you employ your own relatives, you might be qualified to deduct their wages as a business cost, which will lessen the measure of taxable salary you're due for.
In the event that you are employing a kid under 21, for example, you can abstain from paying Federal Unemployment Tax Act (FUTA) taxes based on those wages. Contracting a spouse as an employee — yet not as a partner— could likewise exclude you from paying FUTA taxes based on those wages.