Running your own business comes when joys and heartaches. The key is to avoid too much of the latter.
With that being the case, recording and paying taxes as a business owner can be one of life’s biggest headaches.
If you’re self-employed and have no employees under you, life is much easier when it comes to your tax responsibilities.
On the other side, making sure you take the right amount of money out for employees and meeting your other tax responsibilities as a business owner, well, it can sometimes seem downright taxing.
Don’t Make Running a Business Taxing
In running your own business, be sure that you not only are meeting all your tax requirements, but that you are receiving the deductions entitled to you.
For those individuals working out of their homes full-time, there are myriad of deductions one qualifies for, though many oftentimes forget or quite frankly do not know what is and isn’t acceptable to the IRS.
If you’re one of those self-employed folks working out of a private residence, note the following:
- Your home is deductible…. up to a point – Working out of your home does allow for some deductions, but don’t expect to cover the entire residence from top to bottom. If you set aside a room etc. as your work area, you can use that as a deduction (estimate the square footage involved). What you can’t do is try and deduct the entire residence;
- Your home office supplies – Assuming that your business needs office supplies, those can be used as deductions. Make sure you save the receipts for items you purchase. If you end up getting a new computer, fax machine, printer or other such office item, you can also deduct those. The key is always to save the paperwork from such purchases, especially if you need to show at a later date that you did in fact buy such items;
- Your client meetings – When you mix and mingle with clients, you can deduct such meetings (that is up to a point). Meals and mileage to and from such meetings is fine, but don’t try and deduct a gift you may have bought them etc. Stretching things too far could run you the risk of an IRS audit, so it is definitely in your best interests to record and be honest about your deductions. If you do have legal questions or in fact do get audited, a New York tax attorney or one closer to you can assist you with how to proceed;
- Your health insurance – Unless you have been under a rock for the last three or so years, you know about the governmental requirement that the majority of Americans be covered by health insurance. As a result, make sure you not only have coverage, but look to see if you are eligible for a tax credit. The whole idea behind Obamacare was to make health insurance affordable for the majority of the country. When it comes to medical items, you also can deduct a portion of your doctor visits (including mileage to and from) and prescriptions or other such purchases;
- Your retirement planning – If you are wise, you have been putting away money over the years for retirement. In doing so, you are planning for that day and time when you will not be working, most likely getting by on Social Security income. Whether you have an IRA or other such retirement vehicle, try and contribute as much as possible to it yearly. This then allows you to record deductions from the money you put into the plan. While there are caps on how much individuals may invest in their retirement portfolios, doing it now and getting the deductions makes it well worth it.
When it comes to doing your taxes as a self-employed business owner, they don’t have to seem as frightening as they might first appear.
Getting organized now, keeping all your necessary receipts, and knowing who to turn to in the event of a dispute and/or audit, can make all the difference in the world.
If doing your taxes seems a bit taxing to you, put organization and the help of others to work for you.
Photo credit: BigStockPhoto.com
About the Author: Dave Thomas writes about business topics on the web.
