Accounting For Tax Deductible Expense On Cash Flow Statement 5 Tax Tips Every Small Business Owner Should Know

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5 Tax Tips Every Small Business Owner Should Know

Although I have done 12 years, our firm does not do taxes. When I started my practice it was a service I just didn’t want to offer. However, we partner with CPAs and other tax professionals to ensure that the guidance we provide to our clients is consistent with the advice given to them by their tax professionals.

As part of that guidance, there are some tax benefits that most business owners either don’t know about or simply don’t take advantage of. There are also certain “deductions” due to incorrect tax information that should be avoided. Here is a list of the five most common.

Track all expenses consistently

Track all your expenses, including those you pay personally. Business owners ask me all the time “What about the stuff I charge on my personal credit card?” Yes it is all deductible; All you have to do is get it on the accounting records and account for it. Remember that a credit card is personal so don’t add that account to your chart of accounts. They will be counted as owner or shareholder contributions. Note: Record these charges monthly so you don’t forget at the end of the year.

Avoid money leakage

As a small business owner you sometimes face cash flow problems. As a result you fall behind in paying your bills and your taxes. While your seller may not be able to assess late fees, you can trust the IRS will in the form of penalties and interest. And these my friends are non-deductibles. No, not even the interest part. Tip: Stop this money drain by paying your taxes on time and use those funds on deductible expenses.

Maximize retirement contributions

Most small business owners are so busy running their business that they never stop to think about what they will do when they retire. I’m not sure you’re thinking of retiring at all. But the fact is that you — one day. So you need to have some kind of nest egg. There are many retirement plan options that allow you to keep some funds for your retirement tax-free, and they are all tax deductible for business. Yes, you can have your own company retirement plan. nice isn’t it Note: Consult your tax advisor and your financial advisor to discuss retirement plan options.

Expenses paid individually

I can’t say this enough – stop combining your personal expenses with the business. They’re not tax deductible, and we accountants — we know when you try to do that. Believe it or not we are smarter than the average bear. Note: Do not mix together.

Section 179

The IRS allows you to deduct the expense on the purchase of a large fixed asset in the first year, subject to certain qualifications. You can deduct up to $500,000 and bring your taxable income to zero. Tip: If you can, hold off on buying any and all appliances until December so you can buy just enough and not too much.

What tax tips have you taken advantage of to keep more money in your business?

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