TAX TIPS FOR SMALL BUSINESS OWNERS

TAX TIPS FOR SMALL BUSINESS OWNERS

We've researched several articles and found some resources for you regarding Tax Tips for Small Business Owners.  The below article contains some information and links to the IRS and State of Florida Department of Revenue also.

As a small business owner, you many not aware of all of the different tax strategies that are needed to maximize your profits.  We've included some tips for you to consider and provided some links for you to research further.  Require additional information?  Consult a professional knowledgeable about your area of concern.

Firstly, small business owners need to make sure they are paying what they should and taking the appropriate deductions to reduce their taxes.  This includes understanding about what your tax obligations are on the Federal, State and Local levels.
 

Where to begin?  
 
The IRS offers are virtual workshops online to help small business owners determine their federal tax responsibilities.  This program offers 9 lessons that may be accessed individually to answer your questions covering topics such as:
 
“What you need to know about federal taxes and your new business?”

“How to manage payroll so you withhold the correct amount from employees.”

“How to make tax deposits and file a return to report you payroll taxes.”
 
There are more topics to discover for sure and the IRS video offers links to IRS documents for your reference as well.  Here's the link for you: click here.

For those business owners in the State of Florida, the Florida Department of Revenue is a great place to begin.  Florida requires you to be aware of the taxes you may be required to collect and/or pay.

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  • Sales and Use Tax

Sales tax applies to the sale, rental, lease, or license to use goods, certain services, and commercial property in Florida (unless the transaction is exempt). If your business will have taxable transactions, you must register with the Department of Revenue before you begin conducting business in Florida.

  • Reemployment (formerly Unemployment) Tax

Reemployment assistance gives partial, temporary income to workers who lose their jobs through no fault of their own, and are able and available for work. Employers pay for reemployment assistance through a tax administered by the Department of Revenue.

  • Corporate Income Tax

Corporations and entities that do business, or earn or receive income in Florida, including out-of-state corporations, must file a Florida corporate income tax return (unless the business is exempt).

  • Other Taxes

Other taxes administered by the Department of Revenue include communications services, documentary stamp, fuel, gross receipts, insurance premium, pollutants, severance, and solid waste and surcharge.
 
For Florida Business Owners, the Florida Department of Revenue offers links to pay your taxes and links to the counties here that you may need to pay taxes in, here’s the link for your reference: Click Here.
 
Some counties, such as Palm Beach County, require business owners to apply for Local Business Tax Receipts (BTR), formerly Occupational Licenses, which are issued by the Constitutional Tax Collector’s Office.  Business Tax Receipts are payable annually July 1 through September 30.  The application may be downloaded and includes instructions for you.
 
Palm Beach County law requires any business in Palm Beach County selling merchandise or services to purchase a Business Tax Receipt.  This includes one-person companies and home-based businesses. 
 
In addition to the Business Tax Receipt, businesses should comply with any local license and/or ordinance requirements.
 
Owning a business is complicated!

 

Protect Your Small Business
It might be an excellent idea for you to consult with a professional tax adviser, CPA or Tax Attorney.  These professionals are knowledgeable regarding taxes and may be able to guide you through potential pitfalls with the IRS or other local taxing authorities.  As most business owners know, time is money, and for a small business owner, it’s important to have qualified professional in which to consult with specifically regarding your business rather than try to figure out what you need to do yourself.
 

Keep good records or have someone keep good records for you
Should you be selected for an IRS examination, it’s best practice to keep your records for a minimum of four years. 
 
Examples of important documents business owners should keep include:
 

  • Gross receipts: Cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips and Forms 1099-MISC
  • Proof of purchases: Canceled checks, cash register tape receipts, credit card sales slips and invoices
  • Expense documents: Canceled checks, cash register tapes, account statements, credit card sales slips, invoices and petty cash slips for small cash payments
  • Documents to verify your assets: Purchase and sales invoices, real estate closing statements and canceled checks
  • If you have employees, then you have to keep employment tax records, too. Keep all employment tax records for at least four years after the date on which the tax return becomes due or the tax is paid, whichever is later.
  • If you change your method of accounting, records supporting the necessary adjustments may be material for an indefinite time. Also, keep records relating to the basis of property for as long as they are material in determining the basis of the original or replacement property. What does this mean? It means that you must keep these records to figure any depreciation, amortization or depletion deduction, and to figure your basis for computing gain or loss when you sell or otherwise dispose of the property.
  • If you lost your records due to circumstances beyond your control, such as a natural disaster like a flood or an earthquake, you may substantiate a deduction by reasonable reconstruction, however, best practice is to consult with a professional for guidance.

 
Take every LEGAL deduction you can

  • Business expenses are the cost of conducting a trade or business. These expenses are common costs of doing business, and are usually tax deductible if your business is for profit.
    • According to the IRS: To be deductible, a business expense must be both “ordinary” and “necessary.” An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business.
  • Capital expenses are the costs of purchasing specific assets, such as property or equipment, which usually have a life of a year or more and increase the quality and quantity of products and services.
    • There are two ways to deduct capital expenses. You can “depreciate” them by deducting a portion of the total cost each year over an asset’s useful life; or you might be able to deduct the cost in one year.  Consult your tax professional for specific details regarding capital expenses.

Using Accounting Software in Your Small Business
Software saves you time compared to handling the books manually (by hand).  It is usually more efficient to use software to eliminate simple human errors.  There are several options and variations with each software package.  It’s highly recommended that you do the research and determine your needs, the options and consult with similar business owners for recommendations before making a software investment.

There are certainly more topics to discuss. However, if all of this sound confusing to you? Consider outsourcing your accounting function because it allows you time to focus on your business and do what you do best. 

Wendy Ettorre