Unofficial Tax Guide

All business, large and small, are required to pay income taxes. As with personal taxes there are a number of strategies that businesses can use to help relieve the burden of income tax payments.

Each year a large amount of money slips through the fingers of many business owners all because they failed to keep records of all activities that are related to business. There are a large number of business expenses that can be consider a tax deduction; however, proper documentation of these purchases must be obtained. Additional deductions may include, but are not limited to, food for employees or business meetings, transportation expenses, or additional education or job training.

All business owners are eligible to use their products or merchandise that was purchased for business use as a tax deduction; however, receipts must be obtained. Business owners who provide their employees with uniforms should keep all receipts from the purchases. In addition to employee clothing, computers, copy machines, fax machines, and other business equipment are all qualifying deductibles for a business on a tax return.

Business owners who operate their business out of their home are eligible for a large number of tax deductions. By determining the percentage of the home that is used as the operation site of a home business many individuals working from within their home are entitled to deductions on many home expenses. It is common for home business owner to deduct a portion of their heating, maintenance, and electric bills. Home business owners may also be eligible to use a portion of the interest on their home mortgage loan or property tax as a deductible.

Before the tax year ends a large number of individuals donate to charities that are approved by the IRS. Making a charitable contribution to an approved charity qualifies as a deduction on an income tax return. Businesses are also able to take advantage of the tax deduction for charitable contributions. Since it is likely that new business equipment may be purchased before the end of the tax year, the old equipment must go somewhere. Many businesses unknowingly throw away potentially valuable equipment. By donating old business equipment to a charity, businesses are able to claim a charitable contribution deduction. This deduction is in addition to the tax deduction that they are eligible to receive for purchasing the new office equipment.

When a business is first developed the owners must register with any local or state governments, depending on the location of the business. At this time many business owners must decide whether to incorporate their business or not. An alternative to incorporating a business is a limited liability company (LLC). Each LLC has their own tax benefits; however, many times incorporating a business offers a wider variety of tax benefits. Business owners can change a limited liability company to a corporation and visa versa if they seek additional tax benefits.