BUSINESS TAXES
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What I do not like sometimes in classes are answers to most questions is it depends . Well here is my answer it depends on a long list of items related to the business . The big new business title is LLC , Limited Liability Company , this is a State Title and IRS sees this type of entity as a non-taxing entity . I am not saying that an LLC is not taxed but if only one member is involved in the business it would be taxed as an individual on their personal 1040 return . This same individual can elect to be an S-Corp or a C-Corp . If more than one individual is involved in the LLC the business would be treated as a partnership . More information on these type of entities should be discussed with an attorney , Enrolled Agent or tax professional .
What is considered a tax deductible small business expense ?
There are so many different small business expenses . There are tools , supplies , computer ( as long as you can show business use vs personal use ), and travel for business , for a larger list of expenses you can deduct please use Publication 535 from the IRS .
If I use my car for business , how much expense can I write off ?
Yes . There are a couple ways to deduct car expenses one being mileage rate . In 2016 the standard business mileage rate is . 54 cents . The other way is Actual expenses which is just as it sounds all the actual expenses for the vehicle . That would be gas , maintenance and repairs , registration , insurance , if there is a loan on the vehicle then you can deduct the interest on that loan . Even though you can take actual expenses you still should keep track of the miles business or other miles to show business use . A taxpayer needs to keep a log of miles . It can be on a calendar where is shows the beginning miles for the year and the ending miles for the year but also the miles driven for business each day . There are nice phone apps that track your mileage each day as well , if you do not keep good written logs but there has to be some record of miles driven for business and personal so you can prove your business use of the vehicle .
How do you determine if a worker is an employee or an independent contractor ?
Does the individual receive a W-2 or a 1099 at the end of the year ? There is a lot of controversy with IRS and businesses on how to make that determination . Does the individual work with other companies doing the same type of job ? Does the individual submit an invoice for the work performed ? Does the independent contractor provide their own supplies or tools to perform their duties ? Does the individual set their own hours ? If answer to all these question could be yes then they possibly could be an independent contractor . If no then the individual could be an employee . There are other questions but these are some basic ones .
What is the difference between “ depreciating ” and “ expensing ” an item ?
Depreciating an item is expensing the cost of the item over the life expectancy for that item . Expensing is taking the cost of the item and deducting it in the year acquired . Usually to be able to expense an item the useful life of the item is usually less than a year .
What is the best way to minimize taxes on my business ?
There is no easy way to minimize the taxes . Just keep a good record of all expenses and income for the business .
Thank you to Lisa Vivens , an Enrolled
Agent , of L & V Bookkeeping , LLC for generously providing these helpful tax tips . This is just a brief overview , to find out more information please consult your tax professional or legal professional for details as to how these matters and others may relate to your specific tax situation .