How To Avoid Overpaying On Your Taxes- 4 Tips For Your Business
April is here and for many business owners that means one thing. It’s time to start thinking about your taxes.
But, you might be privy to more deductions than you initially thought. Here are some common ways you can save on your taxes:
1. Factor in your initial costs:
You may have paid for business expenses before your business got off the ground. For example, perhaps the computer you use for your business was bought before your business was up and running. Or maybe a prospect you took out to lunch in your business’s early days is now a client. All of these costs can be deductible, but you need to have the proper documentation, such as a logbook filled with records. According to the IRS you can deduct up to $5,000 of business startup costs incurred after October 22, 2004 and any remaining costs need to be deducted over the course of a few years.
2. Calculate your car expenses manually:
The IRS has a standard mileage rate for vehicle related tax deductions. In 2015 it was 57.5 cents per business mile plus tolls and parking. But, you can actually save much more money by crunching the numbers yourself. Divide your business miles by total miles driven. Include in your business mileage percentage all expenses related to your car.
3. Consider employee reimbursements:
You need to set up an accountable plan to validate that employee expenses you paid for were business related. However, once you do, factors such as transportation, hotel expenses, food and gas can be deducted. The caveat is that employees must bring proof that these expenses are business related within 60 days of the expense.
4. Plan for the future
You can potentially save a lot more on deductibles by strategizing for the future. Consult a tax professional to make 5 year projections for your business, so that you are aware of relevant deductibles for your business, as it grows and know to save the appropriate receipts.
Taking control of your taxes
You work hard to run and grow your business. Use this tax season to understand your benefits so you can file knowledgeably, without overpaying. Taking out the time to research your deductibles and file your taxes correctly can help you save hundreds, if not thousands of dollars, that you can invest in your business.