Tax Concerns that Every Small Business Owner Should Be Aware Of

U.S. Congressman Dave Camp, the chair of the House Ways and Means Committee, has a goal of reforming the nation's tax code. He says the tax code is bigger than the Bible, but doesn't include any of the good news. The tax code is large and complex, and if you don't understand at least the basics, your small business could be in trouble.

As a small business owner, the first thing you have to realize is that tax planning is a year-round event -- especially if you want to keep your tax bill as low as possible. High taxes are certainly the biggest concern of any small business owner, so it's important to understand what your legal responsibilities are when it comes to paying taxes. This election year, tax codes, employment regulations and retirement security remain a top concern for small business owners.

"As campaigns for elected office intensify between now and November, it is important that the issues small business owners care about are included as part of the national debate," Martin Mucci, CEO and president of PayChex, said in a statement. Small business deductions can certainly help you reduce the amount of taxes you pay, but many expenses are commonly overlooked.

Did you know businesses with 10 or fewer employers that average less than $25,000 are eligible for a tax credit of up to 35 percent? Or that when you travel out of town on business that your meals, travel costs and hotel rooms can all be written off? (Just be careful not to go overboard.)

Once you save $2,000 toward retirement, you can receive a tax credit. If you need to further your education to help your business, those classes, seminars or training can be written off. Work out of your home? Nearly 100 percent of business owners can take deduction on items for a home office space, including internet and phone bills.

All of this might seem simple enough in writing, but it's important you keep good records. The more you deduct in April, more red flags are raised to the IRS. It's important to know that some of your deductions may not be eligible for deduction depending on your business' legal structure. You might be trying to avoid "double taxation" or keep your self-employment and payroll taxes low, but you need to understand which legal structure is right for your business -- S Corporation, C Corporation or an LLC. What might seem like standard business deductions are affected by your legal structure.

A C Corporation can deduct 100 percent of the health insurance it pays to employees, but LLC's are a different story. When operating as an LLC, 2 percent or greater shareholders are not considered employees. That means if you're the only employee and you run an LLC, you won't be able to deduct health insurance costs. There are many examples you can point to that show how different business structures affect the taxes you pay, including employee education costs, corporation losses and retirement benefits.

Source: http://www.artipot.com/articles/1296550/tax-concerns-that-every-small-business-owner-should-be-aware-of.htm

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