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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

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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

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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.

Question by someoneelse: Help with small business tax question?
I’m a self employed/independent contractor and I am interested in paying a friend to be my business consultant. I’ve heard that you can pay someone up to $ 600 and not pay taxes on it or maybe just not have to put together a 1099 for them?

I want to find out whether I can write off the money I pay her and up to how much can I write off and so on.

Any help would be really appreciated!

Best answer:

Answer by Helen, EA in PA
If she is a true consultant and NOT an employee, once you pay her $ 600, you MUST issue her a 1099-MISC. HOWEVER, no matter the amount, she must claim it as income.

This would be an expense for you.

Helen, EA in PA

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Question by e_grabin: Small Business Tax Question?
I purchased into a company called YTB for $ 500.00, and couldn’t keep up with paying the $ 50.00 p/month membership to keep my online travel business. Can I write this off as a loss on my taxes? If so, would I have to file a seperate form for small business? Would I get anything back for this loss? Please anyone help. Thank You!
Because it is publicly traded on the stock market, it is suppose to be considered a company.

Best answer:

Answer by MikeDawg
YTB looks like a scam/MLM/Pyramid to me. . .icky.

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I’m Peter Holtz with the Financial Performance Center. One question I get all the time is, “When do I pay and how much are estimated taxes for my business?” Business taxes can be a little bit confusing. There are certainly more ways to pay and more things you have to pay than your normal income tax as a W-2 employee.

First, you have payroll; quarterly, weekly, monthly depending on the size of your payroll. You have to pay them. Payroll taxes are very important. Compliance is important, the penalties are high, and you have potential personal liability.

You have to file with the Federal and the State. The Federal is form 941 and DE6. Those are quarterly requirements. Annually, you have to file a Federal 940 and the State DE7. This is for your FICA or Social Security, Unemployment, and Withholding.

If you have to pay estimated income tax, those go quarterly on the 15th. That’s the same as if you just had a W-2, or just had other investments on your 1040.

You may have to pay sales tax monthly or file quarterly and pay estimates. If you have very small sales taxes, you can also pay it annually.

Prepayments are required with quarterly returns. There’s a potential personal liability. The Board of Equalization takes compliance extremely seriously.

There are high penalties. The rules are complicated. Audits are frequent and their enforcement is brutal. BOE is one of the toughest groups to deal with out there.

There are County business personal property taxes required to be paid annually after the April filing due April 1st.

City business licenses – some annually, some monthly. It depends on the city.

That’s a brief overview of those taxes.

Peter Holtz – The Financial Performance Center

15. April could be closer than you think. Though tax preparation may not pay the best part of the owner of a company and many companies Quarterly, spring is definitely the time of year that most small business owners are starting to (or care to think) about their personal taxes.

Before the idea of time tax makes you nervous or anxious, remember that there are some simple things you can do to make this inevitable process.

Look around for> Help. There are many providers that offer tax assistance training. Some might auditor, while other specialists are dedicated only to do with tax issues. And to compare the different offers and the reputation of a potential supplier. Check references and pay attention to personal recommendations it might receive from other entrepreneurs. Reputation is an important indicator of the level of service you would expect to receive. Find someonewho has experience, especially if the situation does not have specific complications into account. The most important thing to remember is that you have many options to choose from, and it is up to you to find the vendor best suited to your needs.

Relevant documents. Much of the preparatory course for the set time with all your “ducks-in-a-row.” This means that you spend your time to compile and organize all relevant documents andRevenue. You know that’s your tax preparer and the IRS will ask for them so they can reduce stress and increase your sense of control by taking the initiative to have collected all this information organized, copied and ready to go.

Consider any changes to the tax rules applicable.’s Tax laws change every year, and could create new deductions and rules that apply to your situation. While tax experts can help you understandhave an impact, you can also take the initiative by providing relevant information supplied by the IRS. On the website of the IRS, there is a section devoted to businesses, which can be found here: www.irs.gov / businesses / index.html. Have a better idea of what to expect will help you relax and take the necessary measures to be transmitted.

Taxes may be inevitable, but did not become a source of anxiety and frustration. Take a deep breath and try to relax. Take time to prepareTo find your documents and you need. Plan your approach and specific questions for a better understanding of your duties will receive. But do not use these simple steps to reduce the personal tax obligations, or for your small business, help you, the entrepreneur, a better sense of control.

http://www.taxhelp.pannipa.com/2010/03/22/tax-prep-101-very-simple-tips-for-small-business-tax-preparation/

If you own a small business, you already know that you pay tax on the rest of their income if they have booked their spending. E ‘therefore logical to ensure that they have booked a legal defense possible. Therefore, the net income (and your tax) is about as small as possible. The IRS allows a fairly wide variety of tax breaks for small businesses.

Here is a list of them. Be sure to include in the coverage of thisSchedule.

1. Deductions for the costs of implementation

In the first year of small business, you can up to $ 5,000 in start-up costs to be devalued. You can also cancel an additional $ 5,000 of organizational costs. Not only that, also have the opportunity, without any deduction for the cost of years ago, spread over 15 years, having started when he opened his business. Eligible costs include things like market research, advertising company, to educate itsEmployees, business, legal and other costs. Ask your tax professional for details.

http://www.taxhelp.pannipa.com/2009/12/21/small-business-tax-help-get-the-tax-deductions/

2. Deductions for Education

First stop: IRS Publication 970, “Business deductions, the work of education.” In most cases, you can bring the costs of training their employees in print, where are the courses for their work.

In other words, if the course helps them to keep pace with market demands (or improve their skills) or if they need morein reality to maintain existing jobs, the indictment in May, as a reduction of legitimate. The bad news is that you can not take a cancellation of all costs associated in connection with the formation of a new independent sector. A few things to note: You may also request the cancellation, if you are alone. Deductions and the cost of going to and from classes. Ask your tax professional for details.

3. Deductions for vehicles

Caution: The rules of deductionThe costs for cars are quite detailed and the federal government, there is anyone who claims these deductions. Well, for starters, always clear and accurate records. You can deduct the cost of two ways:

The first way is to say, a deduction of how many miles you drove, while the company claimed. Currently, you can make a deduction of 44.5 cents per mile. Make sure that the actual amount, as sometimes the changes. The other possibility is that of total expenditure controlThings such as petrol, repairs and maintenance.

Remember: Keep records. If you use your personal vehicle for small business, you need every time you use it for commercial purposes can not be separated later. Objective select the period, purpose of travel, etc. See publication 463 for more information. And here is an important point: if the employee is a vehicle for commercial purposes, while the personal commissions, for example, it is necessary to show that the income of the latter inYour W-2.

A few things to note: If you bought a new (or used) car, you can create a cancellation. You have to decide whether it is better to take a single deduction or spread over time through depreciation. And if the car is a hybrid, you can grant a tax credit. See publication 8910 for more details. As always, your tax professional for details.

4. Deductions for Equipment

YouAbility to make a cancellation of the planned acquisition of small teams. Radiation can be very large – in 2006 amounted to over 100 thousand dollars. And the equipment can be used, the only requirement is to use at least half the time for your business. Eligible equipment includes things like computers, machinery, office furniture, vehicles and other related equipment.

Ensure an updated copy of IRS Form 4562 before planning tax strategy in this articlePeriod. If you decide that this cancellation is effective immediately, it is possible for several years saying that the depreciation of. Ask your tax professional for details.

5. Deductions for Entertainment

The IRS definition of entertainment is very flexible. In general, if you can be in a business meeting, for example, and not reimbursed for costs that up to half the cost of entertainment.They warn that the “show” should be in a business context. This means that if you are a seminar or a conference to go wrong. In addition, the entertainment should come immediately before or after the meeting. You can take a break, if you are self-employed, then cut the deduction of 50 percent does not apply to you. Ask your tax professional for details.

Conclusion

There are many ways to reduce taxes for small businesses. It is generally to increaseThe number and amount of allowable business deductions. Ask your tax professional for details.

http://www.taxhelp.pannipa.com/2009/12/21/small-business-tax-help-get-the-tax-deductions/

Question by Blow Fish: CRA – How long between filling a small business tax return and a notice of audit?
Does anyone know how long is typical between filling a T2 and a notice of audit if you are going to be audited? We are currently filing out T2 but I will be going on holiday for 90 days and don’t want to end up not being in the country in the event of an audit.

My personal tax return was placed on January and I didn’t get receipts requested until September is this a typical timeline?

Best answer:

Answer by Fred S
You can go on your holidays. You won’t be audited in the next 90 days.

Regarding your personal tax return, you were subject to a “review”, not an audit. You simply had to send in the receipts to verify the claim in your online return. As you don’t include receipts when you file online, a certain percentage of filers are reviewed each year. Late summer/early fall is the normal time frame for these reviews.

An audit is a much more involved process. CRA has three years from the Notice of Assessment to do an audit of your personal tax return, and four years for your corporation. Audits typically take place towards the end of the time frame.

While you won’t be audited for your current T2 in the next 90 days, you could be subject to an audit for any of your four previous years’ returns. But if they want to do an audit, they’ll give you notice, and you can negotiate with them. Just make sure someone is checking your mail while you’re away.

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