Tax Tips For Small Businesses

Tax-deductible expenses refer to the ordinary and essential costs associated with operating your business. These expenses are subtracted from your income to calculate your net profit.

Current expenses encompass the day-to-day operational costs of running a business, such as rent, utilities, Internet fees, website hosting, marketing expenses, and other essential operational expenditures. These expenses are deductible in the year they are incurred.

On the other hand, capital expenses are investments anticipated to benefit the business beyond the current year. These may include purchases of computers, equipment, machinery, furniture, vehicles, land, and buildings. Capital expenses are typically deductible over the useful life of the asset. However, there are provisions such as the Section 179 expense deduction and bonus depreciation that allow for the immediate or accelerated deduction of some or all of the cost of capital expenses in a single tax year.

The deadline for personal income tax returns and sole proprietors is April 15th.

For S corporations and Partnerships, the tax filing deadline for information returns is March 15th.

C corporations must file by the 15th day of the fourth month after the fiscal year ends.

If the 15th falls on a Saturday, Sunday, or legal holiday, the due date is extended to the next business day.

Businesses that hire independent contractors must issue Form 1099-MISC to recipients by February 1st, and file it with the IRS by March 1st (March 31st if filing electronically).

Businesses with employees must file W-2 forms by January 31st, along with employer's quarterly reports.

An independent contractor refers to an individual or entity hired by clients to perform specific tasks, for which they bill the client directly. Contractors have autonomy over how they carry out their work, receive payment based on completed tasks, and are responsible for managing their own tax obligations.

Employees, on the other hand, are individuals who work either full-time or part-time under the direction and control of an employer. Employers dictate the terms of the work, including when, where, and how it is performed. Employees have taxes withheld from their paychecks, with the employer covering half of the Social Security and Medicare taxes. Additionally, employees may be entitled to other benefits. For further insights into the distinctions between employees and contractors, refer to this article.

Ensure meticulous record-keeping of all income and expenses, including business earnings from platforms like PayPal or Venmo, which are now required to file a 1099 form for recipients receiving $600 or more in payments.

Preserve your receipts diligently.

Familiarize yourself with eligible tax deductions, including minor expenses, as they can accumulate significantly by year-end.

Contemplate hiring a tax professional to handle your tax returns and provide valuable financial guidance tailored to your business needs. This can save you considerable time and offer reassurance that everything is managed accurately.