The Tax Man Cometh
The tax deadline is just around the corner. Most of us have already filed for 2019, but if you own a small business and haven’t filed yet or need some tips to get ahead of your filing for 2020, read on.
What You Need to Know
Although there have been some significant changes in the past several years, there have been no major changes to the small business tax code. Whether you own a small business or a giant corporation, all businesses in the United States have to file annual income tax returns (the only exception to this are partnerships, which file something called an information return).
Keep This in Mind
-You still need to file your 2019 taxes by April 15, 2020. However, if you owe taxes to the IRS you have until July 15 (90 days) to pay.
-If you are the sole proprietor of your business, in a partnership, or an S Corporation shareholder, you may have to pay quarterly estimated taxes. Not sure if you owe estimated taxes? The IRS website provides you with all the information you need to make that determination.
-Most small business owners pay self-employment tax. This tax is on your net earnings from self-employment and goes toward your Social Security and Medicare obligations.
-If you sell internationally, you need to educate yourself on international taxation and regulations. Working directly with a qualified tax professional ensures that you’re filing appropriately and being taxed at the correct rate.
-SALT Cap: As of 2019, you can only deduct up to $10,000 in state and local property and income taxes. Another change in 2019 was a significant (20%) deduction for pass-through and corporate businesses. There are limitations on service-based businesses like law and accounting firms that make more than $315,000 per year ($157,500 if single).
-C corporations receive a lower tax rate from 35% to 21%.
-The first-year bonus depreciation deduction is 100%. This means that businesses that make eligible equipment and property purchases can deduct the amount of the purchase price up front in full as opposed to deducting a portion of the expense each year.
Also to Keep in Mind
-Plan your taxes throughout the year.
-Stay informed of tax law changes.
-Never make assumptions about the taxes your business may owe. Consult your tax professional with any questions, concerns, or to explain tax codes and laws.
-S-corps were required to file their business taxes by March 15.
-Quarterly estimated tax deadlines are due April 15, June 15, September 15, and January 15.
What Can You Claim?
Rent. If you rent or lease your office space the amount is 100% deductible.
Home Office Expenses. This applies if there is a dedicated workspace in your home that is SOLELY used for your business.
Transportation. You can deduct operating costs for your vehicle if used for business purposes or take the simple deduction for mileage ($.58/mile for 2019).
Advertising. Materials such as business cards, fliers, and digital marketing costs are all deductible.
Utilities. You can deduct expenses for heat, internet use, landlines, electricity, and water.
Business Travel. This includes flights, lodging, ground transportation (taxis, Uber, Lyft, and public transportation), meals, and the cost of essential business related materials (for example, the cost of using a business facility’s electronic equipment, printing, copying, workspace, etc.)
Employee Expenses. Salaries, retirement funds, and educational offerings are all deductible expenses.
Need to know more but not sure where to go? Try the resources below for the most accurate and up to date tax information.
SBA – US Small Business Administration