How to Improve Your General Tax Knowledge

Posted in How-To, Tax Tips

Being a business owner can be an extremely stressful job because besides the work itself, you also need to worry about the employees/contractors, bills, and taxes. In fact, taxes are the biggest stress factor for most business owners because there’s so much to know and understand.  While it can be time consuming and demanding, a little education about taxes can be an extremely useful asset to the business owner.  The key to IRS information as it applies to the small business is to stay ahead of the curve.

IRS Publication 463 is the absolute reference source for explanations of small business tax deductions.  Every business needs to identify business expenses and capital expenses and understand the consequences of these classifications.

  • Business expenses – are those items that represent the cost of doing business.  These expenses are usually tax deductible.
  • Capital expenses – are those costs associated with the purchase of specific assets like property or equipment, which have a life span that increases the quality or quantity of the service or product provided by the business.

Capital expenses are usually easy to identify.  While most business expenses are easy to recognize, the tax repercussions of some of these expenses are not as clearly defined as many business owners expect, especially for the self-employed and home-based enterprise.  Some of the most common business expenses are:

  • Legal and professional fees
  • Employee expenses
  • Educational expenses
  • Home office deductions
  • Tax deductions for certain taxes
  • Software and subscriptions
  • Auto expenses
  • Telephone expenses
  • Insurance expenses
  • Travel expenses
  • Entertainment expenses
  • Charitable contributions
  • Advertising expenses

Of particular interest is the IRS policy regarding the provision of health insurance, which may soon change but is not as expansive as many business owners think. The IRS website (http://www.irs.gov) offers details about tax deductions for businesses as well as free tax training programs.

If you’re not satisfied with these online resources, or if the do-it-yourself approach to taxes isn’t your cup of tea, you can always call us to arrange for a tax planning or business coaching session.