04/12/2016
Alas, the deadline to file 2015 taxes is fast approaching. But for savvy business owners, the prep work for next year's taxes is just beginning. Small businesses collectively face an average effective tax rate of 19.8 percent, according to the US Small Business Administration's Office of Advocacy. That can amount to thousands of dollars or more in taxes each year — no pocket change for your typical mom-and-pop shop.
The good news: While it's likely too late to reduce the taxes you'll owe by this year's April 18 filing deadline, entrepreneurs who start preparing today could reap thousands of dollars in deductions next year, financial experts say.
Here are five key moves business owners should make to take the sting out of tax time next year.
1) Keep your business and personal accounts separate. If you're not an incorporated company, you aren't required to keep a separate bank account for your business. Handling your personal and company expenses in different accounts makes it easier to keep records and prepare tax filings for the following year. You could open up a credit card that you only use for business expenses, and that will solve about 90 percent of your problems."
2) Follow expenses and taxes as you go. Recording expenses as they happen — not six months after the fact — can help save time, reduce the chance of accounting errors, and maximize tax returns. Consider using new technology to make life easier. Expensify is a mobile app that lets you take photos of receipts, then automatically records and categorizes each expense — without the need for you to type numbers in manually. Likewise, cloud-based service ZenPayroll helps you calculate income taxes every month.
3) Claim your home office deduction — the right way.Taxpayers who designate a space in their home to use exclusively for business can get money back through the home office deduction.
4) Track miles driven in your car. Business owners should keep careful records of all car-related expenses throughout the year. One easy way to track travel? Use your phone. MileIQ, a mobile app for iPhone and Android, uses GPS to record how many miles you drove and where you drove to, making it easy to figure out your auto-related deductions at the end of the year.
5) If you have an open position, consider hiring a family members. If you employ your own family members, you may be eligible to deduct their wages as a business expense — and in turn, minimize the amount of taxable income you're on the hook for.
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Source: CNBC Full Article: http://cnb.cx/25tm47K