Tuesday, July 10, 2007

Small Business Tax Tips

Any small business owner knows that they may live or die by the financial decisions that they make. While many cut corners by making prudent purchase decisions, few realize the opportunities that are available to them when it comes to working out the taxes for their business. In this article, we'll give you some tips to help you realize the best ways to optimize your taxes.

- One interesting write-off that many small business owners fail to realize is their health insurance. The taxing laws dictate that self employed people may write off a full sixty percent of their health insurance costs, saving them potentially thousands of dollars. In addition, medical savings accounts can be set up and the contributions made up until April 17th are considered by the IRS.

- When considering employees for your business, think family first. If there are people in your family that can help you to operate the business, you can allow them to take on some of the income of the business, allowing you to put your earnings into lower tax brackets, assuming the relative performs some type of service to the business.

- Another aspect often neglected by uninformed small business owners is the prospect of a retirement fund. You can contribute to a qualified self retirement fund which is completely tax deductible in your returns.

- The first year expense limitation for any small business is now $19,000. Don't forget to write off any business-related practices, including taking potential clients to lunch, or golfing, or whatever situation may merit as an expense. One technique often employed when it comes to lessening the taxes that you face is to buy supplies that you know that the office will need in the coming year early so that you can write them off. While it's not a permanent solution, it can defer the damage your taxes do to you.

Keeping track of your financial records and keeping a clear separation between expenses made for yourself and those made for your business can really ease your struggle come tax time. Being organized and having a plan can save you both time and all-important money.

2 comments:

Allie said...

I know this is old, but interesting post. I want to run a business soon, so I'll keep this in mind. I've been wanting to do this for a while now, and more recently I've thought about buying an existing business instead of starting one from scratch. I'm not entirely sure how to go about this quite yet. Do you have any suggestions? Advice? Thanks.

Maggie R. said...

@Allie - There are a lot of resources online that you can use to find a business. I know there's one called BizTrader.com. It's like this online global marketplace where you can buy or sell a business. You can also use it to find a lender or broker. If anything, it's a good way to know what's even available in your area.

That being said, it might also be worth it to check out local small business groups. They should be able to provide you with useful information as well.

Good luck!