Business Tax

Giving your taxes your full attention just once a year isn’t the best business strategy. Experts suggest that a year-round approach is better for your finances. Click through to learn the best ways to evaluate the impact of taxes throughout the year.

Numerous tax experts agree that addressing your tax liability effectively requires planning throughout the year. Those business owners who reap the most benefits consider their taxes year-round, rather than waiting to focus on tax payments just a few weeks before the filing date.

A typical small business qualifies for roughly a dozen tax deductions. For example, you may be able to claim deductions on the following:

• Cars operated for business purposes
• Business-related travel and entertainment expenses
• Purchases of office supplies, furniture, equipment, and software programs
• Telephone expenses
• Contributions toward insurance policies, retirement plans, and pension funds

It’s surprising how many small businesses never take advantage of these deductions, mainly because they suffer from the “tax-planning-happens-but-once-a-year” syndrome. To fully benefit from these deductions, it’s important to maintain your expense records throughout the year.

Your goal should be to reduce your tax liabilities by retaining records of your purchases and determining the proportion of business costs in combined expenses. By monitoring your expenses closely all year, you can analyze each expense for its tax impact as it’s made. Additionally, smart business owners should contemplate three key steps to tax planning:

1. Invest in the most effective tax record tools for your business. Whether it’s spending roughly $30 on journals and tax books with a set of refill sheets costing less than $10 to do manual bookkeeping or investing up to $2,000 on the latest online software tax-filing applications, you will benefit from more rigorous and accurate recordkeeping. Sure, the initial investment could be significant, but regular monitoring should facilitate tracking expenses and making advance payments, which will save you money in the long run.

2. Determine when you need professional tax tips and planning advice. At times you will be able to justify paying for professional tax services, particularly if you need advice on unclear requirements in tax laws that could be in your favor. To prevent unnecessary complications and aggravations, you must avoid violating tax laws that may be applicable to your small business. If you are unsure of these laws, using the tools at your disposal, such as current software and online recordkeeping, and complementing those capabilities with professional advice when needed, can help you keep your taxes under control.

3. Establish year-round tax planning goals. A good tax-planning strategy will help you accomplish some of these goals:

• Reduce the amount of taxable income
• Claim any available tax credits
• Lower your tax rate
• Control the time when taxes must be paid
• Avoid the most common tax-planning mistakes

Plus, a year-end review at the end of your fiscal year or “busy season” can be most effective if you’ve maintained clear records and an understanding of your financial position throughout the year.

Of course, this is just a general list. Not all deductions are available in all situations, and rules change frequently. Give us a call to discuss which deductions apply to your company.

We offer a FREE initial consultation to individuals and businesses in Sandy Springs, GA and surrounding areas. Call us today at 214-361-1400 to learn more about our tax preparation services.

Everyone knows about income taxes and sales taxes, but we tend to forget about excise taxes, because they’re not obvious. Click through for an introduction to this important class of taxes, and see what’s changed.

Excise taxes are paid when purchases are made on specific goods or activities, such as wagering or highway usage by trucks. The producers or merchants pay the tax and typically include the additional tax in the price to the end consumer. Governments levy excise taxes on goods and services that have a high social cost, such as cigarettes, alcohol and gambling. Excise taxes are also referred to as selective sales or differential commodity taxes.

Here are six key facts regarding common, little-known excise taxes —

• The tax reform bill exempted certain payments made by an aircraft owner or sometimes a lessee, related to the management of private aircraft, from excise taxes imposed on taxable transportation by air.
• To support the use of alternative fuels, fuel tax credits are allowed on certain types of fuel including the following: biodiesel, including renewable diesel and mixture; alternative fuel credit and mixture; and second-generation biofuel producer.
• Indoor tanning service providers may need to file a federal excise tax return. These services are subject to a 10 percent excise tax under the Affordable Care Act. This is an example of how excise taxes are often levied on goods and services that are considered unnecessary.
• Taxpayers who engage in certain specified activities related to excise tax must be registered by the IRS before engaging in the activity. This is known as the 637 registration program. The taxpayer can go online to confirm whether they or a specific company has a valid IRS registration.
• You may be surprised to know that there is an archery federal excise tax, including the importation and manufacture of archery and fishing products. These, of course, affect relatively few people, but are good examples of how a product or service may be subject to a particular excise tax that is not necessarily obvious.
• The Environmental Protection Agency’s list of devices to reduce high tractor idling may be exempt from the 12 percent retail excise tax. This shows that a major component of the excise program is motor fuel, and different rates may apply to different types of fuel — gasoline, diesel and gasohol.

The idea is to limit the use of certain products, such as alcohol and tobacco. States also levy excise taxes. Some people say that excise taxes are stopgap measures to solve short-term problems. In fact, some note that discriminatory excises on the consumption of specified products is a step back in development of fiscal systems, postponing a more proper reform for the country or state.

Are you unsure how excise taxes may affect you? Give us a call so we can help you with your situation.

We offer a FREE initial consultation to individuals and businesses in Sandy Springs, GA and surrounding areas. Call us today at 214-361-1400 to learn more about our tax preparation services.

When you start a business, there are endless decisions to make. Among the most important is how to structure your business. Why is it so significant? Because the structure you choose will affect how your business is taxed and the degree to which you (and other owners) can be held personally liable. Here’s an overview of the various structures.

Sole Proprietorship

This is a popular structure for single-owner businesses. No separate business entity is formed, although the business may have a name (often referred to as a DBA, short for “doing business as”). A sole proprietorship does not limit liability, but insurance may be purchased.

You report your business income and expenses on Schedule C, an attachment to your personal income tax return (Form 1040). Net earnings the business generates are subject to both self-employment taxes and income taxes. Sole proprietors may have employees but don’t take paychecks themselves.

Limited Liability Company

If you want protection for your personal assets in the event your business is sued, you might prefer a limited liability company (LLC). An LLC is a separate legal entity that can have one or more owners (called “members”). Usually, income is taxed to the owners individually, and earnings are subject to self-employment taxes.

Note: It’s not unusual for lenders to require a small LLC’s owners to personally guarantee any business loans.

Corporation

A corporation is a separate legal entity that can transact business in its own name and files corporate income tax returns. Like an LLC, a corporation can have one or more owners (shareholders). Shareholders generally are protected from personal liability but can be held responsible for repaying any business debts they’ve personally guaranteed.

If you make a “Subchapter S” election, shareholders will be taxed individually on their share of corporate income. This structure generally avoids federal income taxes at the corporate level.

Partnership

In certain respects, a partnership is similar to an LLC or an S corporation. However, partnerships must have at least one general partner who is personally liable for the partnership’s debts and obligations. Profits and losses are divided among the partners and taxed to them individually.

We offer a FREE initial consultation to individuals and businesses in Roswell, GA and surrounding areas. Call Dorsey CPA today at 214-361-1400 to help you choose the right structure and ensure that you minimize your taxes.