If you have ever waited until the last minute to file your business taxes, you must be all too familiar with the panic and fear that comes with it. However, even in such a stressful situation, you can file your taxes meticulously. All you need is the know-how of the entire process. By learning which documents you need, and what sort of paperwork needs to be dealt with, you can eliminate the risks and errors associated with last minute tax filing. Taking the longer and difficult route of calculating some deductions can prove to be beneficial than taking recourse to simplified methods. As a business owner, you need to keep a tab on expenses that qualify for deductions so that even in the last minute rush these are not missed out.
Operating an office from home can be advantageous for income tax purpose as you are entitled to sizeable amount of deduction. You have to earmark a dedicated space in your home that constitutes as an office, and is used exclusively for business. This space cannot be used for any other purpose. The deduction amount is calculated @ $5 for every square foot of office space subject to a maximum of $1500. Another method for ascertaining the deduction is to multiply the percentage of home used for office space and actual costs incurred to run the office. This method can turn out to be more beneficial.
The insurance premiums that you pay towards property, workers compensation, malpractice and liability insurance qualify for deductions as they are considered as part of business expenses. In some businesses, premiums for life insurance and vehicle insurance also come under the same category. If a business employs less than 25 people and half of the health insurance premiums of employees are borne by the owner, it is also eligible for deduction. Business owners can also deduct the premiums for medical insurance of their families.
Business related expenses for cars qualify for deduction from income tax. You can maximize the benefit by doing a complex calculation to ascertain car expenses instead of using the mileage rate set by IRS that gives lesser benefit. Dividing the business miles by the total miles driven and applying the percentage to all costs involved in maintaining and running the car gives considerably more benefit.
Prepare an ‘accountable plan’ to show that the reimbursements done to employees such as meals, gas, transportation etc are expenses related to business. The reimbursement claims have to be documented to substantiate the deduction in case IRS calls upon.
Payments made to any industry organization, the money spent in taking up a course for skill development, or for buying books all can be written off. Interests paid of loans taken to finance the business can be treated likewise. Collate all small expenses meticulously to reduce the income tax burden as the smaller components can finally add up to a respectable amount that can make you smile.