It’s tax season and if you operate a small business, it can be an even more stressful time, especially during the first year or two after starting your company. What many people don’t realize is that there are actually a lot of tactics that make tax time a little easier, and even work in your favor! Here are 5 tips for making the most of the tax season for small business owners:
Create a home office. You may be eligible for a home-office deduction if you work out of your home. Especially if the space that is dedicated to running your business, and nothing else. This deduction may not hold up with the IRS if you work on your laptop on the living room couch where you also spend your Sundays watching NFL football but having a work-only zone in your home can pay off during tax season.
Invest in your technology. Having up-to-date technology for your company may be costly on the front end, but business expenses, including costly computers – are deductible up to a certain amount. This amount tends to change year to year, so be sure to check before filing your return. This may also apply to start-up costs that you didn’t think to consider. For example, the cost of a laptop that you bought prior to starting your business may be eligible for a deduction if it is now solely used for business purposes.
Track automobile expenses. Recording the miles you drive for business purposes may seem like a tedious task, but having this information handy along with the amount of funds spent to repair, maintain and even ensure your car can be extremely beneficial. There are two ways to claim auto expenses, the actual expense method and the standard mileage rate method, and this resource provides insight on how to choose the better option based on your situation. There’s a new app MileIQ can help with tracking car mileage.
Prepare for Your Financial Future. Contributions made to a retirement plan are tax deductible up to a certain amount each year – including an ROTH IRA, SIMPLE or SEP IRA. This means that every year you contribute to one of these plans, not only will you be tucking away some money for retirement, but you’ll also receive tax benefits.
Keep explicit documentation of employee expenses. If you reimburse any of your employees’ expenses, such as gas or travel accommodations, they may be tax deductible. According to this article, the key is for business owners to keep “sufficient backup documentation” to show that the charges were made by the employee and that you covered the costs.
If your great business idea is in the fledgling stages and you aren’t ready to quit your current job in favor of fully launching it, start the business as a side-hustle first. Being a self-employed will give you time to observe some of the changes that will come with being an independent business owner full-time. Tax season may not be a time most of us will ever be counting down the days to. But making the most of the tax benefits available to them will at the very least help small business owners feel more confident about filing their returns – and hopefully excited about receiving the biggest refund possible!
Maple C is the founder and CEO of Inspiration Sparks, an inspiration hub for small business readers everywhere. After owning several small businesses, Maple realized her passion is to encourage and inspire. Follow Maple on Twitter: @maplecabot