Rising Cost of Health Insurance? Here’s How You Can Save

You have eventually sealed the deal with your prospective employee; however, they pop in one final question, “Do you have insurance?” Of course, it’s there, but it has been a pain for as long as you have been paying for the expenses. Maybe you have been considering lowering or even eliminating it. Catering for the welfare of your staff is as important as your productivity and profit generation. Look after them properly, and they are more productive. It is very hard escaping the obligation of managing your employee’s health coverage.

Why Get a Health Cover For Your Staff?

When health insurance is absent from your offer, what’s to stop a prospective employee from moving on to your competition? They offer a similar salary range and employee benefits, and their insurance is probably better. Providing health care coverage to your staff is the key to employee retention. Lack of it will expose you to high employee turnover and fewer hires for your small business. Small business medical insurance is one of the things that offer you a competitive advantage. The following are more reasons why you should go for medical insurance:

  • It is the law: Even if you are a small business, when you possess more than 50 employees, then you are legally obligated to provide your full-time employees with affordable health coverage.
  • Group coverage is better: A personal plan covers only you and your family, but with a group plan, you get some additional insurance advantages.
  • Tax benefits: You can enjoy some tax credits for your business when you have a health coverage for your staff. However, it is integral that you buy a plan via a Small Business Health Options Program Exchange. You can even write-off health insurance premiums as a business expense.
  • Improve your employee’s health: A health insurance plan encourages employees to get yearly checks, which means that they will be healthier and more productive.

Determining the best health insurance for your small firm is a cumbersome process. Many small businesses do not have an HR department to back you up, which means you are the eyes and ears everywhere. Comprehending how medical insurance works is the ultimate solution to eliminating your problem, and landing at the best insurance program for your employees. It can be a capital expense for your firm if you are not careful when choosing. How can you get the best medical insurance as well as cut down on the cost?

High-Deductible Mixed With Health Savings Account (HSA)

Such an approach motivates one to think about their costs at all times. With this, you can use your pretax employee money to cater for unpaid medical cost, and any unused funds are carried forward to the future. You have two options: either fund the account or request the employees to do so. HRA’s (Health Reimbursement Accounts) have high deductible insurance plans. The employer should reserve some money to facilitate the reimbursement of the employee deductibles. Staff can roll over any unused funds.

Buying Cooperatives

Small companies can massively save on their employee’s health insurance by increasing their bargaining power. How can they achieve this? These small businesses can join health-insurance cooperatives. Although the actual savings that a firm can make via joining these cooperatives vary, ultimately, the terms of the health coverage might be better than if the small firm went at it alone. Of course, insurance rates in the open market depend on underwriting laws in your state as well as other factors. Nevertheless, you are guaranteed of getting some extras that you would have paid for even if the insurance were not discounted.

Organization Wellness Program

There are very many initiatives that you can start to ensure that your employees maintain a proper wellness culture. You can offer them a gym membership, free screenings and so much more. Such a program can aid your firm in keeping the health insurance cost at a minimum via promoting better health awareness, as they take better care of themselves.

Write It Off As A Business Expense

Any firm that takes a groups health cover for its employees can claim these as business expenses when they are filing their taxes. How does it work? You might need the services of a CPA for perfect accounting of these expenses; however, it is basic.

Disease Management

The main aim of a disease management program is to cut down the effects of a disease that can be a chronic illness or any other condition via continuous screening. When you have an employee that gets extended stay at the hospital will expose you to huge expenses that will be a huge burden for your small organization. This is even harder when your resources are limited. When you offer your employees some personalized, preventive care, you prevent such an expense via proper disease management.

Entirely comprehending medical insurance is complicated. In fact, there are very many insurance firms that have tweaked plans; however, the expense to your firm will be unmanageable if you don’t tread carefully. You cannot afford to miss one, hence figure out a way to lessen the impact on your returns.

How To Save Money Starting Your Own Business

Starting your own business is an exciting time in your professional career. One of the most important things to do in the early days of your business is to save money. Here are some ways you can save money on your own business:

1. Work Out Of A Spare Room

Working from home is the number one cost saver. Ideally, if you can convert a room or garage into an office, then you will be able to deduct a portion of your home as an essential part of your business. Of course, this also saves time too since commuting involves heading to your office. Additionally, everything you use to decorate this space becomes a business expense. Overhead lighting, desks, file cabinets, computers, even a portion of your internet bill. When finding business expenses, spare no expense and fill your office with all the tools and technology you need to run your business effectively.

Of course, if customers or clients will be visiting your place of business, then you may want to consider an office outside of the main house. Choosing a location such as a remodeled garage, basement or garden office with a separate entrance may be less disruptive to your family — this is especially important for teachers and tutors who expect regular visitors. If that’s not an option, you can always meet a mutual location for clients and then — guess what — that meal or golf session becomes a write off.

2. Buy Used Equipment

One of your biggest expenses is your equipment. The advantage of purchasing used equipment is it prevents you from overspending on equipment that you ultimately do not use. What’s more, chances are your equipment — no matter how new — will be outdated and it’ll become another expense next year.

Saving money on older models of any technology will really help your wallet. Of course, we’re not saying purchase an archaic system, as you don’t want to decrease productivity with a slow machine. Instead, create a checklist for everything you may need. Then visit yard sales, as well as used technology stores (or go online) for items you may need.

3. Watch Video Instruction

There is a plethora of free video instruction by online professionals. You can find experts who aptly demonstrate each step of building your business. Need a website — the best, passive lead generation tools — then follow a how-to on YouTube.

Need a logo? Check out Fiverr. Business cards? Of course there’s Vistaprint.

There are plenty of experts who can teach you how to code or master photoshop or manage an app. These online experts can save you money and teach you skills that you need for your business, especially if you want your business to grow. Eventually, you may want to hire an expert for advanced work, but for now, learn the basics and get the job done.

Speaking of hiring however…

4. Hire Contract Workers

When you are first starting your own business, you have to wear a lot of hats including product producer, marketer and payroll specialist. Eventually, you’ll have to relinquish some of those tasks because you prefer to focus on what you are more interested in working on. That, or you’ll need an experienced person to handle a challenging project.

Before hiring out full time employees, save your some money and utilize contract workers. Contract workers can actually live in your area and come into your work environment. Another option is to hire someone to work on a project virtually. There are many online sources where you can hire out contract employees to take care of graphics, payroll or other tasks.

 

5. Free Software & Apps

There is a cornucopia of software and apps that can jump-start your business and preserve the bottom line — this isn’t even considering the freemium tools out there as almost all apps offer deluxe versions that can give you all of the app’s high tech goodies. The benefit of the free software is you can see how often you use it and if it’s worth investing in the full price.

The types of free software and apps can run the gamut of your business needs including: social media scheduling, payroll processing or team communications. For images there are photo editing software as well as software for logos, infographics, and animations or video. There are even free business form templates and apps for online note taking.

As your business grows, you will want to take advantage of analytics to help discover what’s working for your business and what’s not. This way you can increase your efficiency.

Tax Breaks To Help You Save

Tax season is upon us again, and for most people, that means trying to find ways to save as much money as you possibly can. There are many ways that you can take advantage of the tax breaks the federal government offers; often, it’s simply a matter of knowing what those tax breaks are. While you are probably aware of some of the better known deductions – travel expenses, for example – others are not as widely known and can be just as advantageous for both individuals and small businesses. Here are a few lesser known tax breaks to help you save a pretty penny this tax season:

Going Green

Did you make any upgrades to your home this year? If so, did you take advantage of modern, energy-saving technology? If you did, you may be eligible for a tax break. For example, if you had energy efficient windows installed, this could mean a tax break of up to a few hundred dollars. Similarly, if you had a new and more energy-efficient furnace installed, you could be eligible to knock a few hundred more off of your taxes. If you’re an individual filing your taxes, take a look at part two of Form 5695 and see if you qualify for the Nonbusiness Energy Property Credit.

Job Hunting

If you found yourself seeking a new job this year, you may be able to claim some credits related to your job hunting expenses. While there are very specific rules related to whether you can claim any tax breaks from your job hunt, it’s worth looking into. If you are looking for new employment in your current field, make sure to keep detailed records of everything you have to spend.

For example, any fees you incur for resume preparation, or for employment agencies, are potentially deductible if they exceed 2 percent of your adjusted gross income. This is certainly possible if you are not working much; just make sure to keep a detailed record of all costs related to job-hunting expenses. This includes everything from gas mileage for driving to interviews to printing paper for resumes.

Education

Even if you graduated college a long time ago, you might just be eligible for further tax breaks if you are looking to continue your education. Whether that means signing up for one night class, or going back to class full time to earn an advanced degree, you can often write off up to $2,000 per year. This does depend on how much you have spent on further studies, and it also depends on your income, but is worth looking into as your age does not matter.

Child Care Costs

If you have children, there are a few lesser-known tax breaks you can take advantage of. For example, if you do charitable work and need to hire a babysitter while you’re doing it, you can deduct the cost of that babysitter. While you may be aware that you can deduct day-care fees while you’re working during the school year, did you know you can also deduct the cost of summer day camps once school has ended? As with all the other items on this list, just make sure to keep a detailed record of everything.

Medical Care

Deducting the cost of medical care can get complicated, as what deductions you can make varies widely depending on the work you do and the medical insurance you make use of. For example, if you are self-employed, you can usually deduct 100 percent of your health insurance costs. If you are not self employed, you will need to reach the AGI threshold in order to begin deducting itemized health care costs. This is easier to do if you make sure to keep track of miscellaneous costs such as mileage when traveling to doctor’s appointments.

What The Tax Cuts & Jobs Act Means For Your 2018 Tax Return

Many small business owners are unaware of the new tax cuts and jobs act.
Small business owners need to acquaint themselves with the new laws as it will impact their 2018 tax return. For instance, one of the largest changes is in regards to itemized deductions. Businesses can no longer hoard receipts in the name of getting a tax deduction. The standard deductions have doubled up, thus eliminating the personal exemptions. The doubled deductions for married joint filers is $24,000; for singles, it is $12,000.

What Do The Tax Cuts & Jobs Act Mean For Small Businesses?

Large corporations continue to receive tax deductions on their income tax. The rate has decreased from 35% to 21%. For small businesses that are not listed as C Corporations (i.e. partnerships, hybrid LLC, sole proprietors, or the S-corporations), there was a reduction in their business income tax as well.

Small business owners now need to pay their business tax on their tax returns however. They pay the taxes at the same individual rate as any other person which means a 20% reduction. The law provides a 20% qualified business income deduction. The rule applies for the married joint filers who get an income less than $ 315,000 and individuals who get less than $ 157,500.

However when you have an income higher than the stipulated above you still receive deductions which vary. The variations rise depending on various factors such as your wages or occupation.

Other deductions include:

1. Dental And Medical Expenses

The tax laws lowered the threshold regarding the medical expenses deductions. Business owners now can claim itemized deductions they incur out of pocket whenever they exceed 7.5% of the adjusted gross income. The deductions only apply when one files the 2018 tax returns. It is not yet crystal clear as to whether the same rule will apply in 2019. The chances are that it may go back to 10% as it has always been.

2. Losses Due To Casualty Or theft

Previously, the laws allowed one to claim deductions on itemized property losses not reimbursed by insurance. The policy applied to the circumstances happening unexpectedly such as natural disaster, fires, or theft. The law allowed individuals to file until it exceeded 10% of the adjusted gross income.

The current legislation allows individuals to claim personal casualty losses for natural disasters declared by the president. The 10% threshold of AGI will continue to be applied.

3. Charitable Giving

The tax laws have always protected the people with a heart of giving generously to the charitable organizations. However, there have been some slight changes. The changes are with regards to the number of people who will be claiming the deductions. The deductions apply to married joint filers with $ 24,000 and above and to single fillers with $ 12,000 and above.

4. Home Mortgage Interest

With the new laws, you can claim deductions on interests up to $750, 000 as long as you are in the qualified residence loans. The rule applies to combined loans used on buying, building, and improving homes. Some of the restrictions imposed are those regarding interest claimed for lines of credit and home equity loans. Note that the breaks only apply when using the money for building and improving homes and not on personal expenses.

5. State And Local Tax

The state and local taxes mostly affect people living in New York, California, and New Jersey. In the previous system, one could take advantage of an itemized deduction called the state and local tax deductions (SALT). However, the breaks no longer apply to the extent they used to in the past. Now there is a $ 10,000 cap on the SALT deductions. The regulations adversely affect the residents in high tax regions.

How Can Small Businesses Save Money?

Do Not Hire Full-Time Employees

Most of the time, small businesses (and especially startups) cannot afford to keep full-time employees. The full-time employees have many needs including insurance, pension, and allowances. A way for a small business to save money is by looking for temporary employees. They can work for a few hours, and get paid their wages. It is not economical to hire employees when there is not much work to be done.

Try Bartering

The most important thing for small businesses is to conserve cash as much as possible. The habit helps a company to focus on its growth. One way is to monitor the business cash flow keenly and avoid excessive expenses. The enterprise can look for a tax advisor to interpret the new tax laws. The information helps in financial planning and conserving cash. Try exchanging goods for goods to avoid the expenses involved in making payments to and from place to place. The practice works for small businesses as it emphasizes growth.

Small Business Tax Deductions For 2019

Owning and caring for a small business can be as tough as it is expensive — especially if you pay more in taxes than you actually owe. Garrett Gunderson, a finance expert performed a small study on small business tax and found that a large number of business owners pay more in taxes than they should. While you are not expected to be a pro at business tax, it is important to know where you can save money so you can grow your business.

Here are a few ways to save this tax season in 2019!

1. Hold On To Your Receipts

Holding on to your receipts is extremely important because they show your shopping history and what you buy on a daily basis. A lot of items on your receipts can be deducted on your taxes. Depending on your business strategy and structure, there are certain deductions you can apply to all of your structures. Unfortunately, it can be hard to keep up with every receipt you get over the year since small pieces of paper can go missing or be misplaced.

A good way to keep track of your receipts is to take pictures on your phone and label them as “business receipts”. Other alternatives include using apps that will store and organize your receipts in one place. Many also have features that let you import photos of receipts, and forward email invoices.

2. Start Retirement Today

Start and pay for your retirement now so you can get the payoff later. A self employed individual’s taxable income can be lessened by putting extra money to a 401k account, and the money isn’t taxed unless money is taken out! Small business owners who are under the age of 50 can add up to 6,500 to a Roth IRA or a retirement account. Those who are older than 50 can add 6,500 to theirs.

3. Earn Money From Your Business Equipment

Section 179 gives small business owners the opportunity to avoid tracking depreciation by acting like the equipment as a business expense the year it was bought. There is a limit of $500,000 (as of 2018). Business equipment includes anything a business owner may need to keep things running from computers, laptops, furniture, cooking items and office supplies.

The section 179 calculator can help with finding out how much you can save by having the lump sum. Remember that you need to file a 4562 form to elect it as it won’t be automatically applied.

4. Hire A Family Member

When you hire a family member, you make it so you can take a business deduction for compensation paid to that person, this can lower your taxable income and you can even avoid taxes like FUTA and FICA.

5. Account For Carryovers

Unfortunately, some tax deductions or credits will not be fully used in 1 fiscal year but they can be used in the future and can keep carrying on. These things can include net operating loses, charitable contribution deductions, home office deductions, and capital loses.

You should track these or have a software for it so you don’t forget about years later. This is a great way to save and invest money!

Note: Do not sell your old equipment outright.

If you’d like to get rid of equipment or property that’s no longer needed, see if it would be better to leave it (a normal loss) or sell it as capital loss for tax deductions. A normal loss of business equipment is completely taxable. So see what the equipment or property would be classified as under section 1231.

6. Penalty Relief

Try to take full advantage of penalty relief if you are eligible. If you follow these recommendations, and occasionally with an accountant, you might still get in trouble with the IRS and be penalized. See if you qualify for relief.

Some penalties such as not filing for a tax return or paying too late are eligible for penalty relief. There’s also ways people can be considered for relief like people who attempted to follow the rules but were unable to due to life events that were not in their control or those who fixed the issue once they received the notice.

What is your favorite tax reduction that we listed here? What are some ways that you get tax deductions for your small business? Tell us in the comment section below and share this with other small business owners!

What Does An Accountant Do With Taxes?

Accountant's desk riddled with forms, calculator, glasses and a sticky note saying tax time

Tax laws are constantly changing and quite frankly trying to keep up with all of these changes can be a complex tax. Tax accountants help companies and also individuals make sure they remain in alignment with tax laws by making sure they file their federal and state income returns. In fact, some tax accountants are even willing to offer tax planning advice to help businesses save more money in taxes.

While this may not be the path that all accountants choose to take it’s important to know that there is still some value in hiring a tax accountant because the wide array of services they tend to offer businesses both large and small.

Tax Return Preparation

Do you find yourself often dreading tax return season? That’s one of the great assets of having a tax accountant. Tax accountants primary responsibility is to meet with clients to help them assess their financial needs. This includes but is not limited to gathering needed documentation, such as pay stubs, investment income statements and other financial documents.

Tax Planning

Every corporate business decision leads to tax ramifications, which is complex in general. Companies who typically do business outside of the United States typically experience complexities much more than other businesses do. In most cases, this leads could lead to a growing need for tax professionals.  

Many tax accountants choose to specialize in tax planning because it helps them develop strategy around their client’s financial situation to minimize income tax. Most companies hire internal and external tax accountants to help them develop long term plans that will ultimately help them save money.

Real Estate or Taxable Investment Dealings

Do you own a rental property? If you do it will be in your best interest to hire a tax accountant. Owning a rental company creates a lot of special tax situations that you’ll want to be sure you are taking advantage of and making sure you aren’t making any mistakes.

The same thoughts can also apply when you are buying and selling a home in addition to other real estate. While these laws are straightforward, it’s important to make sure you are doing things properly.

Help You File Your Taxes

For obvious reasons a tax accountant can help you file your taxes. This does not mean that you shouldn’t know what’s going on with your personal and business taxes.; however, it does mean that you must be willing to admit that you need some additional help as it relates to filing your taxes.

You Don’t Have To Do It On Your Own

It doesn’t matter how long you have been in business, it’s important for you to remember that you don’t have to do everything on your own. When necessary and possible make sure you are delegating anything that you aren’t able to do on your own.  By having someone help you with your taxes along the way you are insuring your businesses success even before the success comes. There is also a great deal of methodology around the idea that says that you shouldn’t wait until you need help to implore the help of a professional.

What Tax Documents Should You Bring To Your Accountant?

Man running from a tidal wave of tax documents

If you are anything like most people and specifically business owners, the idea of having to even do your taxes can be incredibly stressful. In most cases it’s because many are afraid that they don’t know what they are doing and may make numerous errors and in most cases these people are probably right. Not everyone should be managing their own accounting needs especially as a business owner. Because of this many must consider hiring an accountant and if they do here are just a few things you should bring with you.

Your Social Security Card

This is probably unnecessary if you have used the same accountant year after year; however, if the accountant you are meeting with is new you’ll want to make sure you bring in your social security card for identification purposes. Your accountant will want to verify the spelling of your name and bringing your social security card will help with that. You will also want to bring the insurance cards for your spouse and dependents as well. If for some reason you don’t have access to your social security card, it might be worth stopping by your local Social Security Administration Office in order to get a replacement card.

Income Related Documents

Depending on what kind of worker you are you will want to make sure you are bringing in plenty of income related documents. A list  of these documents include but are not limited to:

  • Form W-2 (wage and salary income)
  • Form W-2G (gambling winnings)
  • Form 1099-A (foreclosure of a home)
  • Form 1099-B (sales of stock, bonds, or other invest-ments)
  • Form 1099-C (canceled debts)
  • Form 1099-DIV (dividends)
  • Form 1099-G (state tax refunds and unemployment compensation)
  • Form 1099-INT (interest income)
  • Form 1099-K (business or rental income processed by third-party networks)
  • Form 1099-LTC (benefits received from a long-term care policy)
  • Form 1099-MISC (self-employment and other various types of income)
  • Form 1099-OID (original issue discount on bonds)
  • Form 1099-PATR (patronage dividends)
  • Form 1099-Q (distributions from an education savings plan)
  • Form 1099-QA (distributions from an ABLE account)
  • Form 1099-R (distributions from individual retirement ac-counts, 401(k) plans, and other types of retirement savings plans)
  • Form 1099-S (proceeds from the sale of real estate)
  • Form 1099-SA (distributions from health savings accounts)
  • Form SSA-1099 (Social Security benefits)
  • Form RRB-1099 (Railroad retirement benefits)
  • Schedule K-1 (income from partnerships, S corporations, estates, or trusts)

Expense-Related Documents

  • Form 1097-BTC (bond tax credit)
  • Form 1098 (mortgage interest)
  • Form 1098-C (charitable contribution of vehicles)
  • Form 1098-E (student loan interest)
  • Form 1098-MA (homeowner mortgage payments)
  • Form 1098-T (tuition for higher education)
  • Business expenses (summarized by type and amount)
  • Child care expenses (summarized by provider and amount)
  • Gambling losses
  • Medical expenses
  • Moving expenses
  • Personal property tax, such as car registration paid
  • Real estate tax bills
  • Realized gain/loss report for any stocks, bonds, mutual funds and other capital investments sold during the year
  • Receipts or acknowledgment letters for gifts to charity
  • Rental expenses (summarized by property, type, and amount)

What If I’m Missing a Document?

If you’re missing a document, you can ask your employer to give you a new copy. If you’re missing 1099 contact your client.

Why Does My Startup Need an Accountant?

entrepreneur doing taxes in personal office overlooking city

When most people think about startups and startup founders they assume that the best way both should operate is simply by bootstrapping as many things as they possibly can. In the start up world, bootstrapping is the common practice that encourages individuals to do as much a they can with very minimal cost. While bootstrapping is something that should be done while trying to build a sustainable companies there are some things that you simply can’t bootstraps and accounting is one of them.

From day one it is important that you know exactly how your money is being spent, where it’s being spent and how much is being spent and quite frankly if you’re bootstrapping everything else in your business you may not have time to keep your eyes on this sort of thing. Below we share just a few reasons why your start up needs to hire an accountant.

Financial Management

As with anything else, the sooner you begin practicing financial management, the better off you will be when you have a ton of money to manage. As startups it’s important that you learn how to handle your finances early. We see so many startups fail or wound up in legal trouble simply because they mismanaged their money so poorly in the early days of their business it became the norm as their business progressed. Do not buy into the misconception that you should only hire an accountant when you have a certain amount of money in the bank.

Saves Time

When most people think about finances they automatically go into a place of negative thinking. While finances are not always the most glamorous thing to talk about, outsourcing it will help you save a lot of time. Think about how much time you probably spend going to the bank to cash, deposit and withdrawal money from your account simply because you have to do other things first such as see how much money is already there. Additionally, consider how much money you spend on invoicing each month. If you hate dealing with finances, outsourcing them will lift a huge burden for you.

Helps Your Business Grow

One of the number reasons why small business growth is often stifled is because startup founders tend to focus so heavily on areas in which they don’t perform well that they lose sight of the areas in which they thrive in. If you really want to see your business go to the next level, considering outsourcing an area such as accounting in order to give yourself the opportunity to focus on the areas in which you are comfortable.

Your Business May Require an Audit

Every small business has nightmares about the possibility of having their business audited and in many ways that nightmare is valid. While not all small business are required to conduct audits but if you don’t speak with an accountant first you may not find out that your business has to do an audit until it’s too late. By hiring and account you are ensuring your records are not only compliant but that they are being properly regulated.

Your Budget May Be Falling Short

A recent study conducted by the Bureau of Labor Statistics stated that about half of all businesses will fail after five years of opening.  While there may be many various reasons as to why a company may fail, it can mostly be attributed to not having an accountant around to help you analyze your budget, catch errors or even accurately capture financials.

Do Self Employers Have To Pay Quarterly Taxes?

A self employed person filling out paperwork with CPA for quarterly taxes

Before one can truly answer the question about do you have to pay quarterly taxes as a small business you must understand what is identified as a self employer. According to the IRS the following things must apply to you:

  • You carry on a trade or business as a sole proprietor or an independent contractor.
  • You are a member of a partnership that carries on a trade or business.
  • You are otherwise in business for yourself (including a part-time business)

What Obligations Do Self Employers Have?

As someone who is self-employed it is often times required that you file an annual return and also pay a tax quarterly fee that is estimated.

Under federal law, the self employed must pay what is referred to as an SE tax in addition to income tax. SE tax is required because it is identified as the social security and medicare tax for individuals who work for themselves. It is often compared to the taxes that are withheld from the pay of wage earners for social security and medicare.  In most cases when you hear someone refer to self employment tax they are primarily talking about social security and medicare taxes.

Before you can decide whether or not you must pay self employment tax and income tax it is important for you to identify your net profit and or net loss.  You can do this by subtracting your business expenses from your business income. If your expenses are less than your income, the difference is net profit and becomes part of your income. If your expenses are more than your income, the difference is a net loss. You usually can deduct your loss from gross income.

Once you are able to determine whether or not you are self employed and how much you must pay in quarterly taxes you are now ready to start marking quarterly payments but now you’re probably wondering how. If you head on over to the IRS website you will be able to identify a form that is called Form 1040-ES. It is used to help you figure out your quarterly taxes. It also contains a worksheet that you will fill out  that can help you estimate how much you should be paying in taxes.

After you determine your quarterly taxes it’s now time for you to start focusing on  how to file your annual return. In order to file your return you will need to use Schedule C.  Schedule C is used to report your income loss from a business you operated or a profession you once practiced. In most cases a Schedule C is used for employees and businesses who have expenses that are less than $5,000.  

Another popular question that is often asked is are you required to file an information return and the answer is yes. If you have made or received a payment as a small business or as a self employer you are required to file an information return which is defined as a mandatory tax document that businesses must use to notify the IRS about such transactions. (For example, IRS Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2 are all information returns.) Informing the agency about reported transactions is mandatory.

At the end of the day it is important that you know the law in your state. By understanding your tax law you will understand which tax forms you need to fill out, what taxes you’re required to pay and most importantly you will be able to identify how the IRS views your business.

Can You Claim Expenses Before A Business Starts?

Glasses on a business expense claim form

When starting a new business most startup founders have to spend a large amount of their own personal money to start the business. While that may be stressful there is good news, you can now take a start up deduction to limit your tax bill. Here’s how:

What Can I Write Off As a Startup Founder?

Once you launch your business the cost of all business expenses become deductible. These business startup costs are capital expenses. These are the costs that you incur to get an asset (a business) that will benefit you for more than one year.

In most cases you are unable to deduct expenses unless you sell or dispose of the business; however, there is a tax rule that will allow you to deduct up to $5,000 in start up expenses a year then after that you can deduct the remainder over the course of 15 years.

Here are examples of start up costs you can write off:

  • Legal and accounting fees
  • Licenses, permit, and other fees
  • The cost of investigating what it would take to create a successful
    business, including research on potential markets or products
  • Advertising costs, including advertising for your business opening and creating a business website
  • Office rent and utilities paid before the business begins operating
  • Rental of business equipment such as computers and office supplies
  • Costs for employee training before the business opens, and
  • Expenses related to obtaining financing, suppliers, customers, or
    distributors.

Can A Small Business Deduct The Cost Of A Computer?

Yes and no which means it depends on the situation. If you purchase a computer for your business and you use that computer exclusively for your business you can deduct the entire cost. If you use it for more than half of the time for your business you can also deduct the cost.

Additionally, you have to take into consideration your personal time. If you use a computer only 60 percent of the time, you can only deduct 60 percent of the expense.

Are There Exceptions to Start Up Cost Deduction?

There are exceptions to start up cost deduction because some costs related to opening a business may not be considered a start up expenses.  A few of these exceptions could include the following:

  • Inventory
  • Mile Tracking
  • Long-Term Assets
  • Research and Development Costs
  • Organizational Costs

When Can You Deduct Business Startup Costs?

Expenses that began as start up expenses are now operating expenses once your business fully launches. An example of this could include supplies such as paper, pens, printers, computers, etc.  These operating costs are the things that keep your business going on a day to day basis.

For Tax Purposes, When Does My New Business Begin?

Many people often ask when does your new business begin and according to tax purposes the IRS says that a venture becomes a business once it acquires all the assets necessary to perform its intended functions. You must also put those assets to work. The moment you start doing business is when you start doing business even if you aren’t yet earning money.

For example, If you have business that provides therapy to customer or clients your business begins when you first take the initiative to offer your services to other people. According to the IRS nobody has to hire you before you can become a full business you just have prove you are available to be hired.

In what ways can you claim expenses before a business starts? We’re always open to new thoughts, leave your comments below.