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Question by mbush40: Is Obama Lying when he says he’ll remove the Capital Gains tax off Small Business?
I didn’t think Small Business had a Capital Gains tax.

http://www.topix.com/news/2008-presidential-election/2008/09/obama-tax-cuts-for-the-middle-class

he said it, check your facts don.

Best answer:

Answer by Don
I don’t think you have your fact right. First, Obama has never said anything about removing capital gains, in fact he has talked about increasing them and you are right there is no capital gains on a small business, so obviously he never addressed this issue.

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Question by monaya: Are equipment purchases for a small business tax free?
Do you not pay taxes during transaction or do you pay and deduct it at the end of the year? If you deduct at the end of the year do you include the taxes paid or only the original retail cost?
United States NJ

Best answer:

Answer by delightful
If you are UK then you pay the tax when you purchase and then claim it back quarter yearly

What do you think? Answer below!

Article by Wayne M Davies

It is perfectly legal to deduct your next vacation. Here’s how to do it.

To qualify for this deduction, you must meet the following two criteria: 1. You are self-employed or own a small business; 2. On your next trip, you combine business with pleasure.

The first requirement is pretty cut and dried. By “small business” we are including any type of self-employment activity, full-time or part-time, home-based or “bricks and mortar”. This deduction applies to any type of small business entity: sole proprietorships, partnerships, corporations, and limited liability companies.

The second requirement is somewhat trickier and will be the focus of this article.

To deduct any U.S. trip, you can combine business and pleasure, but the primary purpose of the trip must be business. And here’s how the IRS defines a trip taken primarily for business purposes: the number of “business days” must be greater than the number of “personal days”. To complete the definition, travel days are considered “business days”.

Here’s an example to clarify the rules: You take a 10-day “vacation” to Orlando. You spend one day getting there and one day getting back. You spend four days attending a seminar. The other four days are spent with Mickey Mouse & Company.

Let’s tally up the days:

Business Days = 6 (2 travel days + 4 seminar days)Personal Days = 4 (doing theme parks)

So, are the number of business days greater than 50% of the total days? Yes. So here’s what you get to deduct: 100% of your transportation expenses (even though 40% of your days were personal days) and 100% of your “on-the-road” expenses for the six business days, including hotel bills, cab fares, rental car, seminar fees, dry cleaning, laundry and meals.

Keep in mind that the meal expenses are still subject to the 50% rule. In other words, when we say that “100% of your on-the-road expenses” (including meals) for the business days are deductible, the actual amount of the meal deduction will be 50% of the meals cost.

Also realize that transportation expenses include air fare to and from your destination (if you take a plane). If you drive to the vacation spot, you can deduct the actual cost of gas or take a deduction based on the current IRS-approved mileage rate.

The on-the-road expenses for the four personal days are not deductible. But you’re still getting a great tax break here. Assuming you spend ,000 for transportation and the six business day expenses, a sole proprietor in the 35% tax bracket (15% federal tax + 15% self-employment tax + 5% state tax) saves 0.

Before you take your next trip, do some planning to include business activities and let Uncle Sam help you pay for it.

Article by Wayne M Davies

For most small business owners and self-employed people, bookkeeping is about as much fun as a root canal. But like it or not, it must be done, otherwise you’ll end up overpaying your taxes big time.

Perhaps this article will help you see this tedious task in a new light. Follow along with me and let’s turn your bookkeeping nightmare into the best paying part-time job you ever had.

First, a question:

How much money do you make right now — per hour — at your “regular” daytime job or in your business? Is it per hour? per hour? per hour? Make a mental note of that amount. Now, let’s say by “keeping the books” this month, you are able to find ,000 worth of deductible expenses.

Let’s also assume you are in the 35% tax bracket (15% federal income tax plus 15% self-employment tax plus 5% state tax). So, for every ,000 of deductions, you save yourself about 0 in taxes (,000 x 35% tax rate).

One more assumption: it takes you about 2 hours to properly record and document that ,000 of deductions. Hmm. You spend 2 hours and save 0 bucks.

How much money did you just make for yourself — per hour? 5 per hour. Now compare that to how much you make per hour working in your business or at an employee job. Which “job” paid you more? Even if it takes you 4 hours — it’s like having a job that pays you .50 per hour. Still a pretty good hourly wage, don’t you think?

How does that make you feel about bookkeeping? Not such a bad deal after all, is it?

Still not convinced? Making .50/hour or 5/hour isn’t enough motivation? I understand. I know how painful it can be to crunch those numbers. It’s not for everyone, especially if you prefer not to touch anything financial with a 10-foot pole.

If just the thought of doing the books makes you break out into a sweat, please consider this advice: outsource it. Hire someone else to do it. If you really hate it that much, why torture yourself?

“But I don’t want to pay someone else to do it.” Is that what you’re thinking now?

Let’s go back to the numbers above. You can find a good bookkeeper for /hour (or less). If tracking your expenses is saving you 5/hour and you pay someone else /hour to do the books, you’re still coming out ahead by 0/hour. The cost of the bookkeeper is covered by the tax savings it creates.

Either way, whether you do it yourself or outsource it, bookkeeping is the best money-saving activity in your small business arsenal. Take advantage of it.

The IRS today released a final guidance for small employers eligible to claim the new small business health care tax credit for the 2010 tax year. Included in the Affordable Care Act enacted in March, the small businesses health care tax credit is designed to encourage both small businesses and small tax-exempt organizations to offer health insurance coverage to their employees for the first time or maintain coverage they already have.

The new guidance addresses small businesses questions about which firms qualify for the credit by clarifying that a broad range of employers meet the eligibility requirements, including religious institutions that provide coverage through denominational organizations, small employers that cover their workers through insured multiemployer health and welfare plans, and employers that subsidize their employees’ health care costs through a broad range of contribution arrangements.

In general, the credit is available to small employers that pay at least half of the premiums for single health insurance coverage for their employees.

It is specifically targeted to help small businesses and tax-exempt organizations.

The maximum credit goes to smaller employers – those with 10 or fewer full-time equivalent (FTE) employees – paying annual average wages of ,000 or less. The credit is completely phased out for employers that have 25 or more FTEs or that pay average wages of ,000 or more per year. Because the eligibility rules are based in part on the number of FTEs, not the number of employees, employers that use part time workers may qualify even if they employ more than 25 individuals.  For more tax updates visit us at Monster Tax.

Question by g l: does a small business owe sales tax to a manufacturer if it is reselling the product to federal goverment?
I run a small business and purchasing equipment from a manufacturer to sell to the federal govement – will I owe sales tax to the manufacturer if the end user is the federal goverment?

Best answer:

Answer by Paint Guru
You need a sales tax exempt letter from the purchaser (government) in order to provide to the manufacturer. They need to keep a copy of that form on file to show why they did not collect sales tax from you.

You may want to contact your client and ask them for the form. They will know what it is.

Best of luck.

What do you think? Answer below!

Question by Darrell: What are the tax advantages to starting a small business?
I have been thinking for a while about starting up a small business, based out of my home. It will basically be a mobile auto service business. I have heard lots of stuff about tax advantages to starting up a small business. I have also heard that you can write off a vacation once a year as a board of directors meeting. What are the facts about tax advantages for small business, or where on the web can I find this info? Any help is greatly appreciated!

Best answer:

Answer by AB
You can’t write off a vacation as a meeting. The IRS only allows deductions if you do legitimate business work. You can find information about what can really be deducted here: http://www.irs.gov/businesses/small/article/0,,id=99336,00.html

Know better? Leave your own answer in the comments!

Question by SmoothActivity: Quarterly Small Business Tax?
I started a business earlier this year and I now I have received a from to file quarterly tax. I sell services, not products…am I still supposed to file this and can someone please explain what is a Quarterly Small business B&O Tax Credit Table?

Thank you so much!

Best answer:

Answer by jwishz
I assume you are talking about sales tax reporting. If so, simply show total sales, less a deduction equal to the amount of sales which are non taxable. If you are asking about some other tax…payroll, income please clarify

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Question by mallicoatdd: Small Business Tax and Planning Question?
I have a question about the following tax situation.
I run three home based businesses with my wife that were started in 2005. I also work full time. Through all of these businesses we have made about $ 1500.00.
We have expenses such as printing materials, Internet, Phone, Mileage, ebay fee’s, advertising costs, website setup and maintanence. Thus far we have not gotten any kind of biz license, filed a ficticious name or anything else
My main questions are:
1. What are the pro’s and con’s of doing an LLC that operates them all versus simply filing a Schedule C with my Tax ID? If i do this now before the end of the year will it apply to this whole year. or do I start fresh with next year as an LLC.

2. I would like to buy a computer before years end and be able to amortize (?) it all this tax year using the “hummer clause” (section 117 ?) ?
3. What is the best accounting software for setting things up…
4. Are there small biz tax softwares that really work well.
Thanks

Best answer:

Answer by stanley f
see an accountant and don’t be so cheap it will save you money in the end

Know better? Leave your own answer in the comments!

1. Independent Contractors
Since payroll taxes can add up quickly, some business owners will do everything they can to avoid them. However, this is a big mistake, and can lead to fines and penalties. One tactic that is commonly used is to hire all staff as independent contractors, even when they should be classified as wage earning employees. However, too many independent contractors is a huge red flag to the IRS, and in order to avoid penalties you will need to prove to the IRS that they all meet the rules for the classification. Even if the employees agree to the situation, the IRS may still call your bluff and audit you.  

2. Payroll Taxes
Speaking of payroll taxes, as a business owner you need to understand how payroll taxes work, and how to stay compliant with the IRS in how you withhold and pay them. Since you take taxes out of your employees’ paychecks, it is then your duty to pay them to both the IRS and your states tax department. To learn more about how to avoid payroll tax problems, check out this entry on the RoniDeutch.com Tax Relief Blog.

3. Calculations, Calculations
Even if you avoid the rest of these mistakes, making a simple miscalculation can cause a lot of problems. It is of the utmost importance to be correct when calculating your tax payments and yearly tax return. Even if you do calculate the correct amount, the numbers all need to be typed or neatly written on all forms. If you do make a miscalculation on a quarterly payment, then you are going to have to pay the difference to the IRS when you file your full return in April.  

4. Throwing Out Receipts
One of the biggest mistakes a small business owner can make is to throw away receipts for business expenses. Although regular wage earning taxpayers can throw out any receipts they wish, business owners need to be able to verify any purchases you deduct from your taxable income.  

5. Improper Budgeting and Banking
You need to remember to keep your business and personal finances separate. One of the biggest tax mistakes you can make as a business owner is to intermingle your business and personal bank accounts, expenses, or finances. The IRS can monitor your bank accounts, and if they see you are not keeping your business and personal purchases then they are going to want to examine each one during an audit.

6. Office Equipment vs. Supplies
Too many business owners make the honest mistake of thinking that business supplies and business equipment are the same thing. Unfortunately, in the tax world they are most definitely not. Business equipment, such as printers and fax machines have special tax rules, which require you to depreciate the expense. This is because office equipment is considered a capital expenditure to the IRS.  

7. Your Salary
If have a corporation and pay yourself a paycheck, then you need to make sure that you pay yourself a reasonable wage. Although you can adjust your rate of pay depending on how the business is doing, you need to make sure that the IRS would view the wage as fair. Paying yourself too much or too little is a huge red flag to the IRS and will likely result in an audit.