5 Tax Tips Every Entrepreneur Should Know

You have a lot on your plate as a business owner. From creating a business plan to hiring employees, you will have a lot to do to ensure your business succeeds. Check out luminablog.com for business tips on making your business a success. Apart from these tasks, one very crucial one that many entrepreneurs do not think about is taxes.

One thing you would always want to consider is the impact of taxes on your business. If necessary, you can find a tax advisor online to put you through the essentialities involved in taxation. There are, however, some business tips that will keep your business finances in line with great tax benefits. Some of these tips include:

1.  Hiring: employees or subcontractors?

You must be clear about your company’s needs. Do you need a contractor or an employee? A contractor is a freelancer, and they work in their environment and are hired on a project-to-project basis. Employees, on the other hand, work regular hours. The company dictates these hours, and they receive a steady paycheck at a time agreed to by both parties. Sometimes, entrepreneurs mix up the two and have to pay a large tax bill to social security and Medicare taxes, especially if the IRS determines that your worker is an employee and not a contractor.

2.  Separate accounts

It’s never the best to run your business on your private finances and account. When you open up a business, you should get a business checking and savings account. And, you must ensure that all business’s finances come from these accounts, whether income or expenditure. Also, no personal withdrawals that are not for business purposes should be made. If there is an overlap between the business and personal accounts, you, as the owner, can find yourself hooked on business tax debts.

3.  Straighten up your payroll

Always pay your employees and make sure it reflects on your payroll slips. It would be best to understand the peculiarities of payroll, especially because there are many tax forms and payments that concern your employees. They include income tax, social security, among other dues. Every employee must have completed a W-4 for federal withholding, and you must match their social security and Medicare payments. You have to deposits these payments with the IRS.

Late payments and defaults are heavily punished. You must pay unemployment returns and also deposits and filings for states with income tax. All of these can be overwhelming for you, so you can consider hiring an accountant or a tax advisor to put you through.

4.  Take a start-up deduction on your taxes

Do you know that the expenses you make while starting up your business can be used as a tax deduction? Always make sure to take the allowable deduction for a start-up. These start-up deduction funds can be up to $5000, covering research and development of the business. That is, it is a fund that covers your expenses on researching the business, training employees, and ordering supplies.

5.  File for depreciation

In economics, your business, abstract as it is, can wear and tear over time. And you can claim this depreciation. You can claim it on tangible items like your business computers, cars, buildings, machinery, or intangible items like copyrights, patents, software, among other things. Doing this can help your tax situation every year. You might also want to take it in one huge lump sum. However, it is wise to make this move when you expect a profit. Otherwise, it is a wasted effort.

There are many facets to starting a business, and they can be overwhelming. However, an entrepreneur should never ignore tax planning, as an efficient strategy can save you thousands of dollars every year.

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