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Tag: tax tips

  • Free Webinar | December 11: Top 10 Year-End Tax Strategies To Save Yourself Thousands | Entrepreneur

    Free Webinar | December 11: Top 10 Year-End Tax Strategies To Save Yourself Thousands | Entrepreneur

    Ready to save thousands on your year-end tax strategy? Join our exclusive webinar, “Top 10 Year-End Tax Strategies To Save Yourself Thousands” featuring renowned experts Mark J. Kohler, CPA, and Mat Sorensen.

    Here’s what you’ll learn:

    • A foolproof write-off strategy for buying new auto or equipment by year-end and a foolproof write-off strategy

    • How to maximize IRA and 401(k) contributions for the highest tax benefit

    • Common deductions like home office and travel to save big

    • Knowing when to transition from LLC (sole prop) to S-Corporation tax status by year-end

    • How to close out old entities by year-end to avoid new FinCEN registration in 2024

    • Deciding the best time to set up your LLC or entity—before year-end or on Jan 1, 2024

    Don’t miss this golden opportunity to master year-end tax planning and unlock thousands in savings for your small business! Secure your spot now and let our experts guide you toward financial success.

    About the Speakers:

    Entrepreneur Press author Mark J. Kohler, CPA, attorney, co-host of the Podcast “Main Street Business”, and a senior partner at both the law firm KKOS Lawyers and the accounting firm K&E CPAs. Kohler is also the author of “The Tax and Legal Playbook, 2nd Edition”, and “The Business Owner’s Guide to Financial Freedom”.

    Mat Sorensen is an attorney, CEO, author, and podcast host. He is the CEO of Directed IRA & Directed Trust Company, a leading company in the self-directed IRA and 401k industry and a partner in the business and tax law firm of KKOS Lawyers. He is the author of “The Self-Directed IRA Handbook”.

    Entrepreneur Staff

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  • Don’t Miss This Upcoming Tax Deadline or Expect to Pay These Penalties | Entrepreneur

    Don’t Miss This Upcoming Tax Deadline or Expect to Pay These Penalties | Entrepreneur

    Opinions expressed by Entrepreneur contributors are their own.

    Millions of taxpayers requested a six-month extension to file their 2022 federal income tax return. If you’re among them and haven’t yet completed your return, it’s time to get serious.

    The extension runs out on October 16. While plenty of good reasons exist to file for the initial extension, you want to avoid missing this deadline. The penalties for not filing by then can get costly, and you need to shift your focus to your 2023 return.

    Here’s how to wrap this project up.

    1. Finalize your documentation

    The biggest underlying reason people seek a tax extension is that they don’t have the documentation they need to file a complete, accurate return. Use these remaining months of your extension to sort through any loose ends and instill proper bookkeeping and recordkeeping systems so that you don’t run into this issue in the future.

    Most business owners and investors are eligible for a long list of tax deductions. Make sure you have the proper documentation for any deductible expenses, such as business purchases, travel, education, training, charitable contributions and your home office. Double-check your documentation to ensure there aren’t any errors or omissions before you complete your return.

    The biggest deduction available to entrepreneurs and investors with real estate holdings is depreciation. Taking this deduction correctly requires substantial documentation through a cost segregation analysis — this determines the schedule for depreciating each component of the asset.

    Land, land improvements, buildings and building fixtures all depreciate at different rates, and a cost segregation analysis will help you accurately calculate the right amount of depreciation. For the 2022 tax year, bonus depreciation was still 100%, making this an even more powerful part of a tax strategy. But these studies take time, so make sure you are on top of this.

    Related: Want Taxes to Be Easy? Work on Them Year Round

    2. Check for possible tax credits

    Tax credits can be even more valuable than tax deductions because they give you a dollar-for-dollar reduction in your tax liability. Yet, many taxpayers don’t take advantage of the credits for which they are eligible, either because they don’t know about them or because they’ve received bad advice about using them. Use your extension to make sure you receive the proper tax credits on your return.

    The IRS offers a lot of information about tax credits on its website, and a tax advisor should be able to guide you through the process. Some of the many tax credits of interest for entrepreneurs and investors for the 2022 tax year include:

    • Installing solar energy systems.
    • Buying certain electric vehicles.
    • Creating jobs in economically distressed communities.
    • Providing certain benefits to employees.
    • Hiring people from groups that have faced significant barriers to employment.
    • Investing in research and development.
    • Making your business accessible to customers with disabilities.

    These are valuable tax credits — take them if they apply to you. Don’t pay more tax than you are required to pay. Invest that money back into your business.

    Related: What Gen Z Side Hustlers Don’t Know About Taxes — But Should

    3. Prepare your return

    While you can use various tax software programs to prepare a return and file your taxes, entrepreneurs and investors benefit greatly from working with a high-quality tax professional. There’s simply too much money at stake and too much complexity to treat your taxes as a do-it-yourself project.

    If you don’t have one already, look for a certified public accountant (CPA) who specializes in tax. As you speak with potential advisors, look for someone who takes a consultative approach. You don’t want to feel like just another transaction. You want a tax advisor who will be a trusted member of your wealth strategy team.

    Related: 6 Steps to Make Tax Season As Painless as Possible

    What happens if you don’t file?

    It gets expensive. Being just a day late can turn into a penalty equal to 26% of the taxes you owed back in April.

    If you’re still not ready to file your taxes by the October 15 deadline, you absolutely should be working with a tax advisor to navigate the situation. Your advisor will help you in two key ways. First, it’s possible you can get an additional extension. These are rare and mainly apply to people living outside of the U.S. or serving in a combat zone, but it’s worth checking. Second, and most importantly, a high-quality tax advisor will help you create a plan to get your taxes back on track.

    Sticking your head in the sand is not a tax strategy, and facing your tax situation doesn’t have to be frustrating or confusing. A good advisor will help you understand the tax law so that you can use it in a way that gives the government what it wants while also legally and permanently reducing the amount that you need to pay.

    The government wants people to invest in seven key categories (business, technology, energy, real estate, insurance, agriculture and retirement), and it offers great tax incentives to people who do so. Your tax advisor should be talking with you regularly about how you can build these investments into your wealth and tax strategy. It will allow you to make way more money while paying far less in taxes.

    Tom Wheelwright

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  • Tackle Taxes With This Prep and Deduction Bundle With Courses Just $2 Each | Entrepreneur

    Tackle Taxes With This Prep and Deduction Bundle With Courses Just $2 Each | Entrepreneur

    Disclosure: Our goal is to feature products and services that we think you’ll find interesting and useful. If you purchase them, Entrepreneur may get a small share of the revenue from the sale from our commerce partners.

    There’s a reason everyone dreads doing their taxes. It’s a difficult and confusing process, made even worse if you’re a busy entrepreneur. Forbes revealed entrepreneurs revealed that among their ten most burdensome problems, four of them are related to taxes. If you’d like to get a better grasp on all things taxes from the comfort of your own home, The 2023 Tax Preparation & Deduction Super Bundle can help.

    Packed with 15 informative courses filled with 123 hours of instruction, The 2023 Tax Preparation & Deduction Super Bundle gives a well-rounded education on all things tax preparation and deduction. And right now, this bundle can be yours for just $29.99 (reg. $375) — that’s just $2 a course.

    The 2023 Tax Preparation & Deduction Super Bundle provides you with a ton of courses to help get you up to speed on the ins and outs of the confusing process of tax preparation, as well as the part you really care about — tax deductions. And you can access them all from the comfort of your own home right on your device, so there’s no need to head back to the classroom.

    This bundle offers courses like Income Tax Schedule C Small Business Sole Proprietor 2023, taught by real-life CPA Robert Steele. It focuses on tax prep for those that are self-employed, helping you identify things like business expenses and Schedule C income. From there Robert also teaches another important element of tax — credits! — with Tax Credits: Family & Dependent Tax Credits 2023, which schools you on all the important tax credits you need to know about. There’s also a six part Tax Preparation 2022-2023 and many more courses included.

    Snag the 2023 Tax Preparation & Deduction Super Bundle, on sale now for just $29.99 (reg. $375), and get these informative tax courses for just $2 a course.

    Prices subject to change.

    Entrepreneur Store

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  • Want Taxes to Be Easy? Work on Them Year Round, Not Last Minute. | Entrepreneur

    Want Taxes to Be Easy? Work on Them Year Round, Not Last Minute. | Entrepreneur

    Opinions expressed by Entrepreneur contributors are their own.

    Taxes aren’t just a once-a-year phenomenon. Filing taxes begins with a plan and a daily routine. If your goal is to learn a language so you can visit a foreign country, learning in small, easy-to-digest segments makes it easy to absorb and retain. When you finally take your trip, it’s that much more rewarding.

    The same is true of taxes. Attacking them in the handful of days before they’re due is a formula for stress, error and failure. Breaking down tax-related recordkeeping and related tasks into smaller segments, such as reviewing receipts and invoices an hour a week, makes the process more manageable and less overwhelming. Keeping taxes on your radar all year can even be good for your overall finances.

    Related: Make Tax Season As Painless as Possible by Taking These 6 Steps

    Make a regular tax thing

    Have you ever skipped mowing your lawn for a few weeks? Suddenly, it’s up to your knees, the grass gets stuck in your blades and it takes way longer than it should. The same is true of handling your tax-related finances. If you document and file your receipts and invoices when they’re fresh in your mind, they’re easy to account for properly. That’s why you should look at them regularly — how regularly will depend on how much work there is. I recommend looking at everything at least once a month, but if you’re doing a lot of business, you may want to do it every two weeks or even weekly. Just make it part of your routine.

    An excellent way to handle that is to write down an appointment in your business calendar. Writing it down will help in multiple ways. You should also physically write down what you must address at each session.

    When you do that, you can also use the information to look forward. This can be really useful if your income differs from month to month. By seeing what you brought in in the past month, you can:

    • Get a better idea of what your year-end income will be.
    • See whether you may fall short and address that before it’s a severe problem.
    • Know which clients are your best.

    When you know whether your year-end income looks like it will be much different from your previous year or what you expected, you can make plans to have money ready to pay at the end of the year or make adjustments to your estimated tax payments.

    If you find you’ll have more money than you expect, it also provides an opportunity to make investments. You can buy something that will help the business — or even take a larger share home.

    Don’t lose the paperwork

    Your routine attention to tax-related paperwork will pay off at tax time. This is true whether you’ll be doing the filing, an employee will or a tax accountant will. Record the expenses that will count as deductions at your regular session closest to when they happen. This will include regular outlays such as rent; variable outlays such as utilities or internet (note the Internal Revenue Service rules if you’re declaring the costs for a home office versus a traditional office or facility); and your business phone. One of the easiest expenses to lose track of is business mileage. Entering mileage and the reason for travel will make things easier when it’s time to file.

    This is where a document management system (DMS) will help. When your business calendar says it’s time to attend to your tax-related recordkeeping, you only need to capture all the relevant documents. Whether it’s an invoice, a checking account statement, a receipt or any other support you’ll need for the IRS, the best DMS will pull all the data in.

    Leveraging optical character reading (OCR), such a solution will work from cell phone photographs, existing computer files and email attachments. Then, once the data are stored in the cloud, you can categorize your paperwork by type and manipulate them to produce reports you can use, such as expense or income statements. These also reduce errors that make the IRS unhappy and can result in fines and penalties. And, should the IRS wish to conduct an audit, all of those data will be easily accessible and organized. The IRS even prefers electronic records.

    Related: 3 Ways to Save Money on Taxes That Most Entrepreneurs Miss

    Just a little bit goes a long way

    Productivity experts from David Allen to Tony Robbins and publications like Harvard Business Review and Psychology Today have pointed out that the best way to accomplish a large task is to break it down into smaller ones. Short, productive bursts of time will move you inexorably to the finish line as the year progresses. Visual cues, like a Post-It note on your computer, can help you make year-round tax record management a habit. Be specific about your tasks. Mnemonics help; maybe “Taco Tuesday” becomes “Tax Record Tuesday.” With almost no pain, you’ll be prepared when tax season begins. While the procrastinators around you are pulling at their hair and biting their nails, you’ll be doing things directly relevant to your business — with every hair in place and nails intact.

    Jim Conroy

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  • 6 Common Scenarios When You Might Need a Tax Attorney | Entrepreneur

    6 Common Scenarios When You Might Need a Tax Attorney | Entrepreneur

    Opinions expressed by Entrepreneur contributors are their own.

    Tax attorneys specialize in matters of tax law. These laws continually evolve and change, often making compliance a challenge. If you find yourself or your business up against complex tax challenges, facing issues with the IRS or simply want tax time to go a little smoother, a tax attorney can often be a powerful resource of expertise.

    Here are a few notable reasons you might consider the help of a tax attorney in the months ahead.

    Related: Why Business Lawyers Are a Necessary Expense

    1. You are starting a business

    If you’re launching a business but are also new to the process, hiring a tax attorney can provide the guidance needed to navigate the tax obligations that come with it. This includes ensuring compliance with federal tax laws and any state and local tax requirements likely to impact your enterprise. Having an advocate in your corner can provide the insight and support needed to understand your options while avoiding costly mistakes throughout each phase of the rollout.

    Protecting your business, finances and assets requires preparation and adequate structuring. Some business transactions carry sizable tax consequences — and without knowing the potential implications, you could find yourself owning the IRS and state agencies more than you realize.

    With the help of the right tax attorney, you’re often much better equipped to:

    • Structure your company as a corporation, partnership or limited liability company
    • Handle capital gains and losses
    • Deduct off non-performing assets
    • Structure profit-sharing or constructing pension plans

    Regardless of the size or scope of your new business, how you approach tax management is key to avoiding problems and maximizing opportunity. An experienced tax attorney can help refine that approach and design a plan that positions you for success.

    2. You are facing an IRS audit

    Business owners aren’t the only people who can benefit from the help of a tax lawyer. While corporate partners or business owners are sometimes forced to undergo an IRS audit, anyone at nearly anytime is susceptible to audit notification. If this is your situation, you may hire an attorney to communicate with the agency and auditors on your behalf. You may use IRS Form 2848 to provide the tax lawyer power of attorney and represent you before the IRS.

    Your legal representative has the power to receive tax information for the matter in question and the current tax year, though you can extend their access to additional reporting periods by listing them on the form. The right attorney can also help appeal some of the actions taken by the IRS after an audit and help you settle a debt or make an offer in compromise with the IRS.

    Please note that a CPA is not the same as a tax attorney. While certified professional accountants generally help with such tasks as initial tax preparation and minimizing the risk of an audit, such professionals typically aren’t certified legal professionals and, therefore, can’t represent you in court. Tax attorneys help you with tax compliance and defense.

    Related: What I Learned From a Two-Year IRS Audit

    3. You are seeking tax-exempt status

    A Section 501©(3) status is for non-profit organizations like charities, private schools, churches and private foundations. Not every organization is eligible for this tax exemption status, and a tax attorney can guide you through the IRS application process for nonprofit status. Depending on the nature of your organization, there are different forms to complete and an attorney can help determine your eligibility for a particular sector.

    4. You are handling estate taxes or probate matters

    Tax attorneys can handle estate planning and the taxes related to decisions before or after an individual passes away. If your plan is to leave your business or related assets to a spouse or children, there are tax laws that could take a sizable portion of their funds away. Estate taxes are a concern that a tax attorney can address when you are estate planning.

    If you are the recipient of an inheritance, you may have additional tax liabilities. If you don’t know where you may be liable, hiring a tax attorney can provide the expertise to understand and navigate those obligations without running afoul of the IRS. It’s common for people to utilize both a CPA and a tax attorney throughout such a process.

    5. You are facing a tax-related investigation

    If you’ve been charged with tax fraud and are under criminal investigation by the IRS, it may be best to consider the help of a professional. Convictions of tax fraud often come with hefty fines and sometimes even significant prison time, making it important to have the best representation possible. Additionally, tax attorneys don’t have to testify against their clients, something that can’t be said about a CPA. Tax attorneys can also help fight a tax lien and work out tax debt payment options.

    6. You are unable to meet your tax burden

    Owing money to the IRS can put you and your business in a difficult position, especially when the IRS demands payment terms you can’t meet. Falling behind on your tax burden complicates the problem, but a tax attorney can help. Your attorney can help gather evidence to build a case for a smaller payment or debt plan, potentially negotiating lower payments and a more reasonable period of time for debt repayment.

    Related: All Business Entities Are Not Created Equal: Finding the Perfect One for You

    Facing your tax concerns with a tax attorney

    Tax attorneys can help you find relief from legal action taken by the IRS. They can also work with you to proactively prevent tax law issues. But no matter your situation or needs, working with a tax attorney can help ensure you and your business are prepared for any tax-related challenges that lie ahead.

    Anthony Cavaluzzi

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  • The 3 Best Ways to Save on Taxes When You Have Multiple Business Ventures | Entrepreneur

    The 3 Best Ways to Save on Taxes When You Have Multiple Business Ventures | Entrepreneur

    Opinions expressed by Entrepreneur contributors are their own.

    Despite the difficulties stemming from the current crisis — or perhaps because of them — 2020 saw a significant increase in the number of new business applications. In 2020, nearly 4.5 million businesses applied to open their doors for the first time. That represents a 24.3 percent increase from the prior year, according to NerdWallet.

    Why the explosion? Although entrepreneurs often do see opportunities in challenging environments, the wealth manager in me is guessing they were also going after something else during the trying times of the pandemic: multiple income streams.

    Sara Gelsheimer

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  • Free Webinar | April 6: When to Use an LLC, S-Corp, or C-Corp? | Entrepreneur

    Free Webinar | April 6: When to Use an LLC, S-Corp, or C-Corp? | Entrepreneur

    Making your business official through incorporation can help attract investors, save you money during tax time and protect your personal assets from debts and liabilities. Incorporation can come in the form of an LLC, S-Corp or C-Corp. So which is right for you?

    Mark J. Kohler, CPA, attorney, and author of The Tax and Legal Playbook, and Mat Sorensen, attorney, CEO of Directed IRA & Directed Trust Company, and author of The Self-Directed IRA Handbook, will be breaking down all of the options and help you determine which entity is right for your business.

    Topics to be covered:

    • Pros and cons of an LLC

    • How an S-Corp saves taxes

    • Understanding asset protection of your entity

    • Why the C-Corp isn’t the right fit for most businesses

    • What state you should set-up your entity in

    • Avoiding bad advice and scams for your entity

    Don’t miss out! Register now join us on April 6th at 3:00 PM ET.

    About the Speakers:

    Entrepreneur Press author Mark J. Kohler, CPA, attorney, co-host of the Podcast “Main Street Business”, and a senior partner at both the law firm KKOS Lawyers and the accounting firm K&E CPAs. Kohler is also the author of “The Tax and Legal Playbook, 2nd Edition”, and “The Business Owner’s Guide to Financial Freedom”.

    Mat Sorensen is an attorney, CEO, author, and podcast host. He is the CEO of Directed IRA & Directed Trust Company, a leading company in the self-directed IRA and 401k industry and a partner in the business and tax law firm of KKOS Lawyers. He is the author of “The Self-Directed IRA Handbook”.

    Entrepreneur Staff

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  • 10 Important Tax Numbers Every Business Owner Should Know to Save | Entrepreneur

    10 Important Tax Numbers Every Business Owner Should Know to Save | Entrepreneur

    Opinions expressed by Entrepreneur contributors are their own.

    I’m a certified public accountant but my firm doesn’t prepare tax returns. However, I’m also a business owner. This means, like my best clients, I pay close attention to my taxes. Why? Because for a business owner, taxes are usually one of our biggest expenses. If you’re running a business, these are 10 federal tax numbers that are very important for all of us in 2023.

    $160,200

    This is the maximum amount of wages that can be taxed for social security (FICA) benefits at 6.2% (the 1.45% Medicare tax has no limit). Any wages paid over this amount are not subject to the FICA tax — employee or employer. This is important because if you raise an employee’s compensation above this amount, they’re receiving an added tax benefit which should be part of your salary considerations this year.

    Related: These Are the Top Tax Filing Mistakes Made by Small Business Owners (and How to Avoid Them)

    $6,500

    This is the amount you can contribute to an individual Roth IRA account. Roth IRAs often get ignored by my clients but they’re a fantastic way to put after-tax money away and watch it grow tax-free with no penalties or additional taxes on withdrawal. Because the stock market is down, I have a number of older clients taking distributions from their 401(k)s, paying the tax on a lower capital gain, and then transitioning those amounts to a Roth where the amounts are never taxed again. Everyone should be putting money into a Roth IRA.

    $7,500

    This is an added “catch-up” contribution that can be made to your 401(k) account if you’re over the age of 50 — which means that more than half of business owners in the U.S. are probably eligible. There’s also a $1,000 catch-up for individual IRAs for people in this age group. Thanks to the recently passed Secure 2.0, the 401(k) catch-up amount is going to rise to as much as $10,000 annually for those between the ages of 60 and 63 starting in 2025 and will then be adjusted for inflation each year.

    $66,000

    That’s the amount that can be contributed to a 401(k) plan this year which includes both employer and employee contributions and does not include any “catch-up” contributions. This amount is limited to your income and discrimination tests (see below).

    $150,000

    That’s the amount of compensation that defines a “highly compensated employee.” This is important because the number of people you have in your 401(k) retirement plan that earns over this amount will figure into your plan’s year-end discrimination testing and that may limit the amount you — and they — can save. The takeaway: The more employees —particularly non-highly compensated employees — that contribute to your 401(k) plan, the more you can contribute.

    Related: 3 Ways to Save Money on Taxes That Most Entrepreneurs Miss

    $0.655

    That’s the IRS-reimbursable mileage rate for 2023 and it changes every year based on the fluctuating costs of operating a vehicle. This is important because you can reimburse your employee for any miles traveled above the commute to your office (for example to a customer) and you’ll get a tax deduction — and the amount won’t be taxable to them. This is potentially a great added benefit to provide for your staff, particularly in these times of high gas costs.

    $300

    This is the amount you can pay your employees each month to reimburse for their commuting expenses. You’ll get a deduction and they won’t be taxed. If an employee drives to work, you can also pay them $300 to reimburse for their parking expenses with the same tax treatment. It’s another benefit to consider and could be a helpful enticement to get your people back into the office more often.

    $1,160,000

    That’s the maximum Section 179 deduction you can take this year for the acquisition of capital assets. This applies to both new and used assets like capital equipment, machinery, furniture and most computer software. There are “bonus” depreciation deductions that your business can take in addition to the Section 179 amounts. You can even finance these purchases and get these deductions — just make sure they’re “in service” by year-end.

    $12,920,000

    That’s the individual federal estate lifetime tax exemption which means that a married couple can leave more than $25 million of their assets upon their deaths tax-free to the beneficiaries. After that, most transfers of assets will be taxed at 40%. This exemption gets reduced to $7,000,000 individually in 2026.

    $17,000

    This is the amount you can gift this year and the recipient won’t be taxed. This is in addition to the lifetime addition above and applies to anyone, not just family members.

    You know what’s coming next, right? It’s the usual caveat where I write that your situation may be unique and you should always consult your tax professional before making any decisions based on the above numbers.

    Gene Marks

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  • 6 Steps to Make Tax Season As Painless as Possible | Entrepreneur

    6 Steps to Make Tax Season As Painless as Possible | Entrepreneur

    Opinions expressed by Entrepreneur contributors are their own.

    Q1 marks the beginning of a critical time for businesses — tax season. As you know, it can be a busy and stressful time of year for most businesses, regardless of their age, industry or profitability. No one wants any surprises after they file, so it’s important to start preparing sooner rather than later.

    By planning ahead, you’ll ensure your business is organized and ready to file on time. You may never enjoy tax season, but there are ways to make it as painless as possible. Here are six steps to ensure your business is ready — come April 15.

    Related: These 6 Tax Tips Will Help Make Tax Season Easy for Your Business

    1. Prepare throughout the year

    Getting ready for tax season starts long before you’re ready to file your tax return — you should be preparing throughout the year. This starts with having an accounting system in place where you can keep track of your finances.

    There are tons of free and inexpensive options when it comes to accounting software, including QuickBooks, Xero and ZohoBooks. The software is more comprehensive than anything you can do with an Excel spreadsheet, and most give you the option to collaborate with your accountant.

    In addition, businesses should be paying their quarterly tax obligations throughout the year. The exact filing schedule will vary depending on your business entity. Once you get on a schedule, you’ll likely find that paying your taxes as you go will make your life easier and help you avoid any fines or penalties.

    2. Make sure your books are balanced

    You don’t want to run into tax problems because of mistakes or missing transactions. Make sure all of your business transactions are recorded and accurately categorized. Take the time to reconcile your accounts and ensure that your financial software matches what your bank account says.

    You should also make sure that you’re separating your personal and business transactions. Otherwise, you’re going to create a lot of frustration for yourself.

    3. Gather your paperwork

    Start gathering your paperwork together at the beginning of the year. You’ll need to provide receipts for any deductions you took in case your business gets audited. It’s a good idea to digitize your receipts, so you don’t have to worry about anything getting lost or damaged.

    You’ll also need the following documentation to bring to your accountant:

    If you have employees, you’re required to file W-2s with the Social Security Administration by Jan. 31.

    Related: 5 Steps to Tax Season Success

    4. See what tax credits you qualify for

    Next, you want to see what kind of tax credits your business qualifies for. Tax deductions reduce your taxable income, while tax credits reduce your total tax bill. You can look for industry-specific tax credits or see if there are any state-specific tax credits you qualify for.

    One of the most advantageous tax deductions for financing is Section 179, which allows you to write off nearly the entire value of an equipment purchase on the current year’s tax return.

    The IRS provides information on its website about available tax credits and eligibility requirements. It’s a good idea to work with a tax professional to ensure your business actually qualifies for any credits you identify.

    5. Work with an accountant

    If you’re in the early stages of building your business, you may be tempted to file your taxes on your own to save money. However, the short-term benefits often lead to longer-term problems, and most entrepreneurs find more benefits in working with an accountant.

    Tax laws and regulations are constantly changing, and it’s impossible for the average business owner to stay on top of these changes. Accountants understand all of the relevant tax laws and filing requirements and can help you minimize your tax liability.

    Plus, filing your taxes can be time-consuming and tedious, especially if you don’t know what you’re doing. Using an accountant will save you time and help you avoid costly mistakes. Plus, you’ll have peace of mind knowing that your business taxes are filed accurately and on time.

    The upside of working with an accountant extends well beyond tax season; Your accountant can work with you throughout the year to develop strategies to minimize your tax burden.

    Related: 3 Ways to Save Money on Taxes That Most Entrepreneurs Miss

    6. File early if you can

    April 15 is commonly thought of as Tax Day, but the exact filing deadline depends on your business entity. Sole proprietors, single-member LLCs, and corporations that ended their year on Dec. 31 have to file taxes by April 15.

    But if you’re a partnership, multi-member LLC, or S-Corp filing Form 1120-S, you’re required to file by March 15. The IRS begins accepting tax returns beginning in mid to late January, so it’s a good idea to file early if you can.

    By filing early, you’ll avoid processing delays with the IRS and save yourself the stress of attempting to file at the last minute. If you wait too long to get the process started, you may have a hard time getting in with your accountant.

    Scheduling an appointment with your tax pro early ensures you can file on time. Otherwise, you may have to request an extension.

    Joseph Camberato

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  • Free Webinar | March 22: What Entrepreneurs Should Consider Writing Off | Entrepreneur

    Free Webinar | March 22: What Entrepreneurs Should Consider Writing Off | Entrepreneur

    Tax season is here (hooray?) and to make sure that you don’t leave a single penny on the table, we have called in our resident tax experts to walk you through the specifics of write-offs for entrepreneurs. Whether you are a full-time small business owner or making extra money with a side hustle, this webinar is essential to making sure you wind up with the best tax bill or refund possible.

    Mark J. Kohler — author, CPA, attorney, and cohost of the podcast “Refresh Your Wealth” — and Mat Sorenson — author, attorney, and CEO of Directed IRA & Directed Trust Company — have been at this for years, and these self-described “tax geeks” have all of the answers to your write-off questions. During this webinar, they’ll teach you:

    • Commonly missed home office deductions
    • Auto and travel write-offs
    • Changes to meals and entertainment rules
    • Red flags that can trigger audits
    • Changing your entity (LLC, S-corp) structure to save taxes
    • And more!

    This free webinar can save you a lot of dough on Tax Day — don’t miss it! Register now and join us on March 22nd at 3:00 PM ET.

    About the Speakers:

    Entrepreneur Press author Mark J. Kohler, CPA, attorney, co-host of the Podcast “Refresh Your Wealth”, and a senior partner at both the law firm KKOS Lawyers and the accounting firm K&E CPAs. Kohler is also the author of “The Tax and Legal Playbook, 2nd Edition”, and “The Business Owner’s Guide to Financial Freedom.

    Mat Sorensen is an attorney, CEO, author, and podcast host. He is the CEO of Directed IRA & Directed Trust Company, a leading company in the self-directed IRA and 401k industry and a partner in the business and tax law firm of KKOS Lawyers. He is the author of The Self-Directed IRA Handbook.

    Entrepreneur Staff

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  • Do You Qualify For These Green Tax Breaks? | Entrepreneur

    Do You Qualify For These Green Tax Breaks? | Entrepreneur

    It’s tax time, and companies nationwide are looking for sustainable write-offs to help soften the blow and reduce their carbon footprint.

    Like it or not, the Inflation Reduction Act of 2022 (IRA) put into law many tax credits for green business practices.

    “It does contain a virtual garden of green incentives for small businesses’, entrepreneurs, and others seeking to do well for the planet and their pocketbook,” says Steve Miller, a former IRS Acting Commissioner and current National Director of Tax at alliantgroup.

    We asked Miller to sort through all the key tax credits available to your business so you don’t have to.

    Big list of tax credits

    Before deep diving into a few larger items, here is a general list of tax credits available via the IRA in 2022.

    • Sec. 45: Energy production credit: 3 cents per kilowatt hour of clean energy sold to the grid.
    • Sec. 48: Energy property credit: Credit for up to 30% of cost of purchasing clean energy property.
    • Sec. 45Q: Carbon sequestration credit: credit per metric ton of carbon oxide captured and then sequestered or used in your business.
    • Sec. 45U: Zero emission nuclear power production credit: 1.5 cents per kilowatt of zero emission nuclear power produced and sold.
    • Sec. 40B: Sustainable aviation fuel credit: $1.25 per gallon of sustainable aviation fuel produced and sold.
    • Sec. 45: Energy production credit: 3 cents per kilowatt hour of clean energy sold to the grid.
    • Sec. 48: Energy property credit: Credit for up to 30% of cost of purchasing clean energy property.
    • Sec. 45Q: Carbon sequestration credit: credit per metric ton of carbon oxide captured and then sequestered or used in your business.
    • Sec. 45U: Zero emission nuclear power production credit: 1.5 cents per kilowatt of zero-emission nuclear power produced and sold.
    • Sec. 40B: Sustainable aviation fuel credit: $1.25 per gallon of sustainable aviation fuel produced and sold.
    • Sec.45V: Clean hydrogen production credit: Credit for up to $3 per kilo of clean hydrogen produced.
    • Sec. 45W: Clean commercial vehicle credit: Up to 30% of the cost of a clean commercial vehicle.
    • Sec. 48C: Advanced energy project credit: Application-based credit for 30% of the cost of a facility to manufacture advanced energy property (i.e., making solar panels). $10 billion allocated.
    • Sec. 45X: Advanced manufacturing production credit: Varying credits for the production and sale of eligible property; credit amounts based on the energy production capacity of that property.
    • Sec. 45Y: Clean electricity production credit: Credit of .3 cents per kilowatt hour sold.
    • Sec. 48E: Clean electricity investment credit: Credit for up to 30% of cost of electricity production facility and storage equipment for a zero-greenhouse emission facility.
    • Sec. 45Z: Clean fuel production credit: Up to $1 per gallon of clean fuel sold by taxpayers.

    Some of the incentives of this new law can be paid directly to governments and non-profits, almost like a grant. A few of the incentives can even be paid to for-profit companies.

    Plus, this is the first time in a while, congress has allowed certain benefits to be transferred to third parties, meaning they can be sold to investors. Many tax benefits can be carried back three years instead of the usual one year, which means you can get a refund on already paid taxes in prior years.

    Energy efficiency credits

    Under the new plan, there are incentives for improvements to the energy efficiency of existing buildings. The government can allocate a deduction to the designers of the energy-efficient changes. While the prior deduction was $1.80 per square foot, the new provision allows up to $2.50-$5.00 per foot. Other changes expand the ability to allocate the deduction from governments to non-profits (think hospitals and colleges) and Indian Tribes, according to Miller.

    Research and development credits

    Miller points out that the Inflation Reduction Act calls for tax credit changes for research and development. How so? Previously, start-ups and small businesses could take a refundable $250,000 credit against their employment tax liabilities. This limit on start-up credit election doubled to $500K, and what taxes can be offset were expanded.

    “Any small business, whether they qualify for the start-up provision or not, should consider the R&D credit in any event as it is a valuable incentive,” says Miller. “Too many small business owners think of the credit as requiring bench research and white coats. That is not the case. Over the years, the IRS and Congress have expanded the credit to reward many types of innovation and research on US soil.”

    Jonathan Small

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  • Money-Saving Tips Entrepreneurs Often Miss in Tax Filing Season

    Money-Saving Tips Entrepreneurs Often Miss in Tax Filing Season

    Opinions expressed by Entrepreneur contributors are their own.

    There is one time a year that requires a detailed level of attention for a business owner, no matter the size of your business.

    When tax season comes around, entrepreneurs initiate survival mode sometime between January and April 15 and look for every way to get a few more deductions.

    Bookkeeping, tax filing, audits and deductions will assist in keeping a good relationship with the IRS, as well as supporting good habits for your business; however, because getting everything just right can be overwhelming, it is easy to miss important things and leave money on the table that would be better suited in your pocket.

    Tax season reaches beyond the immediate tax return and can have a lasting impact five or even 10 years down the road. While you can make certain deductions one year that will benefit you, as your business grows, having a different strategy is in your best interest.

    This requires experience, a little patience and a willingness to learn from the mistakes you made.

    There are three very important things every business owner should be paying attention to when you file your yearly taxes to ensure you are getting the most out of your return. These examples can also create strong business habits that will help you create a long-term operation.

    Related: 75 Items You May Be Able to Deduct from Your Taxes

    The home office deduction

    While it may be more convenient to work from home, as well as being fiscally cheaper, it may make you a target for audits.

    Since you can deduct items like the square footage of your home office or short trips to the office supply store, it is crucial that you have the documentation to verify everything you list as a deduction.

    With less obvious options like the Augusta Rule — in which you can rent your home out to business events and summit meetings — you have more options for write-offs and every purchase adds up. Nearly every purchase that you make for your business is considered tax-deductible as it relates to your business.

    Although not every person who works from home will be audited, if you were to go through a formal audit and you do not have proper documentation for your deduction claims, you can have those deductions revoked.

    If your business is growing quickly and producing high capital, you may want to consider moving your business into an office lease to keep your home and business separate.

    This will be to your advantage when you are looking for clear defining factors in listing deductions, but if that’s not your cup of tea as an entrepreneur and you like the home office as a center for operations, make sure you keep proper documentation of your home office to ensure your write-off isn’t arguable in the case of an audit.

    Related: These 6 Tax Tips Will Help Make Tax Season Easy for Your Business

    Utilize deductions in the ways that benefit you the most

    Being honest with your deductions is a good practice to have, making sure that you are not putting forth false information to save a few bucks.

    One thing that many people do not consider is overusing deductions that are available. It can be quite easy to get into a rhythm of using the same tactics every year, but this can cost you in the long run.

    Let’s say you were to buy a new vehicle every year or two for your business. It could be a worthwhile plan for the first couple of filings that will help ease some of the financial pressure on a young business.

    However, this can turn into abuse — not from a legal standpoint, but in the metric that vehicles depreciating over time will cost you more than the deduction would save.

    Working with a professional accountant to have a good roadmap to how your deductions will affect you not only this year, but in future filings, is a good thing to consider. This will help with the guidance of what you should be used as a deduction and what would be better to leave behind.

    Map your deductions out accordingly because they can save you a lot of headaches and money 10 years from now.

    Related: The IRS Hates Telling Entrepreneurs Anything About Taxes. Here’s How You Can Find Out What They’re Thinking.

    Categorize your business properly

    It is a necessary task to “list” your business regardless of where you operate. That being said, there are four options upfront as to how you list your business by definition and how your business is classified can save you or cost you money.

    The four business classifications are:

    • LLC: A limited liability company.

    • S corp: S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes.

    • C corp: A C corporation is a legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity.

    • Sole proprietor: A person who is the exclusive owner of a business, entitled to keep all profits after tax has been paid but liable for all losses.

    With all of these options, it is imperative to either know what you are doing or work with someone who does to register your business accordingly in the state you own a business.

    Related: 14 Tax Deductions Your Small Business Might Be Overlooking

    It can be misleading as to which definition will be the best to suit your needs; however, if you do it correctly, it can create a good foundation that will benefit you.

    There can be many options to choose from when you are looking for deductions within your business, whether you are working from home or in an office space, under an LLC, sole proprietor or S corp. If you are unfamiliar with how to navigate this information, it is best to hire an accountant/bookkeeper to help guide you through.

    While there are many “deductions” you can apply to your business, being aware of the things that will benefit you now and in the long run can relieve stress when you need it most.

    Utilize every deduction you can to bring the cost of running your business down like materials, office supplies, office space, vehicles, advertising, etc., then consider what you will still be able to use in the big picture by measuring your growth against what you are saving this year.

    Documentation is one of the most important things you can do, so if you don’t have the time to be on top of it, hire a competent bookkeeper.

    Kale Goodman

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  • 9 States With No Income Tax: Everything To Know

    9 States With No Income Tax: Everything To Know

    Income tax can take a big bite out of your wallet and your business’s bottom line. But not every state in the union charges income tax. Some states, like Texas, have become well-known as business havens for budget-minded entrepreneurs partly because they don’t charge income tax.

    For comparison, here are the nine states with the highest income tax rates:

    1. California – 13.30%
    2. Hawaii – 11.00%
    3. New York – 10.90%
    4. New Jersey – 10.75%
    5. Oregon – 9.90%
    6. Minnesota – 9.85%
    7. Vermont – 8.75%
    8. Iowa – 8.53%
    9. Wisconsin – 7.65%

    This article will look at nine states with no income tax and explore everything taxpayers need to know about these tax-reduced territories.

    What is income tax?

    Income tax is a crucial source of revenue for state and federal governments worldwide. There are several types of income tax that you might have to pay depending on where you live.

    An individual income tax is levied on individuals’ wages, salaries or other income. States usually impose these.

    Corporate income taxes are levied against businesses and their income from business operations.

    Meanwhile, state and local income taxes are other forms of income tax that states have more power over. These are distinct from federal income taxes and subject to each state’s specific tax code. Some states, such as California, impose significant income taxes, while others levy no additional income tax.

    Related: States With the Lowest Corporate Income Tax Rates

    Why do some states charge income tax?

    Income tax is a very reliable source of income. People have to earn money to spend money, which means that levying an income tax provides local and federal governments with enough funding to build schools, maintain roads, pay law enforcement officers and fund all other types of government operations.

    Related: Plan Ahead to Avoid Tax Time Surprises

    Which U.S. states don’t have to pay taxes on income?

    Only some states charge income tax to their citizens.

    Nine states either don’t have an income tax or are set to phase out income tax shortly. These states are:

    • Alaska
    • Florida
    • Nevada
    • New Hampshire — technically, New Hampshire makes tax investment and interest income, but those taxes will be gone in 2023.
    • South Dakota
    • Tennessee
    • Texas
    • Washington State — note that Washington does charge income tax for investment income and capital gains taxes, but only for those who earn a certain amount of money.
    • Wyoming

    If you live in any of these states, you’ll take home more of your money from most sources of income, like your salaries and tips.

    Related: Taxes on Small Businesses Across the Globe, Mapped: See Where Rates Are High, Low — and Nonexistent

    Comparing states with no income tax

    Does that mean you should immediately pack your bags and try to move to one of the above states? Not necessarily. Keep reading to review each state with no income tax and compare them based on their total tax burden and other factors.

    Alaska

    Alaska is both a cheap and expensive place to live. For instance, it has no state income tax or sales tax. The total tax burden for Alaska is 5.10% — the lowest of all 50 states. On top of that, all Alaskan residents get an annual payment from the Alaska Permanent Fund Corp.

    Still, the cost of living in Alaska is higher than average because of its distance from manufacturing centers and the relative remoteness of its cities. So you can expect to pay more for things like groceries and gas.

    Florida

    Florida is a popular snowbird state thanks to its population of retirees and its warm temperatures. While the excise and sales taxes in Florida are higher than the national average, the total tax burden on Florida residents is 6.97%.

    It does have higher-than-average housing costs, but on the plus side, Florida is a relatively cheap state to live in if you want to go to school.

    Related: An Underwater Property in Florida Is Going for $43 Million. The Developer Calls It a ‘Unicorn.’

    Nevada

    Nevada’s total tax burden is 8.23%. Citizens don’t have to worry about income tax because there are high sales taxes on alcohol, gambling, purchasing groceries, buying clothes, casinos and hotels.

    New Hampshire

    Then there is New Hampshire. As mentioned above, New Hampshire doesn’t charge general income tax, but it does charge income taxes on certain things. The total tax burden for New Hampshire residents hovers at around 6.84%, which is relatively low compared to other states.

    New Hampshire is a relatively small state, and the cost of living can vary depending on where you live.

    South Dakota

    South Dakota has a total tax burden of 7.37% for its filers. Even though it doesn’t charge income tax, it does charge heavy taxes on things like cigarettes and alcohol.

    It also charges very high sales taxes and has higher than average property tax rates, making it costly to live here if you don’t have a good source of income.

    Tennessee

    Tennessee’s total tax burden on its residents is 5.74%. Due to legislation passed in 2016, Tennessee lowered taxes for unearned income for its citizens. But this only resulted in a higher sales tax rate and the overall highest beer tax rate for any state in the union, measuring in at $1.29 per gallon.

    Texas

    Texas has a total tax burden of 8.19%. Most of its taxes come from excise taxes and sales taxes because the residents hate the idea of income taxes. Note that sales taxes can be up to 8.25%in certain jurisdictions.

    Furthermore, property taxes in Texas are higher here than in most other states. Even with all that, there’s no denying that Texas has a relatively low tax burden compared to other conditions.

    Related: A Texas farmer offers Elon Musk 100 acres of land to move Twitter offices from California to Texas

    Washington

    Washington has a relatively young population and an average tax burden of 8.34%. Many residents pay high sales and excise taxes, and you’ll find that gasoline prices at the pump are also higher than average.

    Combine that with higher-than-average living costs and high housing costs, and it’s clear that Washington is not among the most affordable states, even if it doesn’t charge income tax (for most).

    Wyoming

    Lastly, Wyoming is a very unpopulated state. It charges a total tax burden of 6.14% on its citizens, which includes excise, sales, (some) income and property taxes.

    While Wyoming might be cheap, keep in mind that it’s only suitable for those who are fans of the frontier lifestyle. This empty state has little going on in terms of metropolitan areas or tourist attractions besides national parks.

    Should you move to a state with no income tax?

    Moving to a state with no income tax is an attractive prospect. No one likes getting a check from their work only to see what the government takes to pay for necessary services.

    While you might rationally understand the purpose of income taxes, you might instinctively feel despondent to see your hard-earned money taken away right as you get it.

    But while it can be tempting to move to a state with no income tax, you should consider the total tax burden each state levies on its residents before proceeding. You should also consider what each state has to offer.

    Related: 4 Effective Strategies to Reduce Your Income Taxes

    For example, many people move to California, which is widely understood to be one of the most expensive states to live in. Why? It’s a beautiful state, with lots to do and job opportunities, particularly in the entertainment and tech industries.

    Similar states, like New York, Hawaii or Minnesota, might have high federal income tax rates for all taxable income and additional taxes to boot but counteract that with low local sales tax rates.

    In contrast, Wyoming might place a low tax burden on its residents. But you must have a job in farming, ranching or mining. There isn’t much to see and do in Wyoming if you aren’t a fan of the great outdoors.

    Then you have to keep business taxes in mind. Self-employed individuals might find some states better than others regarding the final tax bill or their state sales tax brackets.

    Factors like healthcare, pensions and dividend income can make states like Alabama, New Jersey, Illinois and others throughout the United States attractive places to live and work.

    Therefore, don’t immediately pick one of these states and move just because it doesn’t have personal income tax on your earned income. Income taxes are valuable and vital for the government, and in many cases, they can help to fund some of the most enjoyable and profitable parts of state economies.

    What’s the bottom line on states with no income tax?

    There are plenty of states you can move to throughout the US without an income tax. These might be ideal states to move to in the future or states in which to start a business.

    But remember that these no-income tax states have advantages and disadvantages; consider the total tax burden imposed on you and future businesses in each state before setting out for “greener” pastures.

    Looking for more helpful articles to expand your financial knowledge? Check out Entrepreneur’s Money & Finance resources here.

    Entrepreneur Staff

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  • 14 Tax Deductions Your Small Business Might Be Overlooking

    14 Tax Deductions Your Small Business Might Be Overlooking

    Opinions expressed by Entrepreneur contributors are their own.

    While there are other benefits, one of the most important reasons you’re in business is to make money. And it stands to reason that if you’re in business, you’d like to keep as much of what you generate as possible. That could be why so many people hate paying taxes.

    But if you’re doing your bookkeeping correctly, you’ll find there are ways to keep some of the value your business generates. All you want to do is pay your fair share. And keep what’s left to run a successful small business or grow that business into something even bigger.

    Above all, remember that you pay taxes on your profit, and your profit is your income minus your ordinary expenses; you report this to the IRS every year on Schedule C. So when you sit down to do your taxes or hand your information over to your tax accountant, you should be sure you’ve tracked every single business expense.

    Related: These Are the Top Tax Filing Mistakes Made by Small Business Owners (and How to Avoid Them)

    What deductions are obvious? Anything you buy that directly affects your business and is used for your business. If you’re in construction, it’s the cost of your equipment and raw materials. If you’re a web designer, it’s the software you use. Look at Schedule C and you’ll see the obvious ones: advertising, office expenses, licenses, utilities and more.

    You need to be careful defining some expenses, especially if you’re running your business out of your home. Yes, you can deduct the part of your home that you use exclusively and regularly for business. But if you work weekdays at your home office and watch football from it on Sunday, it’s not exclusive to your business. If you only do your month-end bookkeeping in it — even if that’s all you do in it — once-a-month office use is not considered regular use.

    But when you’re assembling your receipts or downloading expense data from your small business financial management system to provide to your tax accountant, there are certainly some expenses that you might not have thought to include. There may be other expenses you claim that are not eligible deductions. If filed in error, these mistakes could cost you fines — or worse — if you’ve deducted more than you should have or are permitted to.

    Related: Here’s Why It Pays to Track Every Tiny Business Expense

    Tax deductions you might be missing

    While Schedule C enumerates 21 types of expenses, you still might miss some perfectly legal deductions. For instance:

    1. Repairs or alterations to your home office: If you’re there all the time, then expenses like painting, re-flooring and brighter light fixtures would be deductible. Having a cleaning service for your office would be as well. The desk and file cabinets you use would also be deductible — as would the repair to the wall after your desk chair banged it up.
    2. Education: Any education or training related to what you do to earn money is deductible. Many professionals require professional development courses to keep their licenses current. Others take classes to learn how to improve their business. If it’s relevant, it’s deductible.
    3. Local travel: When you visit a client and pay to park in the lot across the street, that parking fee is deductible. If you take a toll bridge to cross the river to visit your client’s office, that bridge toll is deductible. And so is your mileage, assuming your client doesn’t reimburse you for those costs.
    4. Your website: A website is a must-have to find and connect with new and existing customers. All related costs can be deductible — paying the person who creates it for you, paying for the website to be hosted, paying for its security, paying for the pictures and copy you post to it, etc. It’s all part of advertising, which is more than paying to run a small ad on your local radio or television station.
    5. Startup costs: If this is your first year, the legal and professional fees you pay to complete and file your paperwork are deductible. Fees above the $5,000 first-year limit can be amortized over the succeeding 15 years.
    6. Research and development: If you’re creating a new product, the expenses relevant to bringing that product to market are deductible.
    7. Interest on debts: A loan you take for business purposes is tax-deductible as long as it’s an arms-length transaction. Keep track of the interest costs so you can deduct them at tax time. Your business credit card interest is also deductible.
    8. Industry publication subscriptions: Every trade has a publication that keeps its practitioners current, from Advertising Age to Chain Store Age to Industry Week. Online subscriptions are also deductible.
    9. Retirement savings for self-employed business owners: These include self-employed simplified employee pension (SEP) plans, solo 401(k) plans and Keogh or HR-10 plans.
    10. Business gifts: There’s a limit of $25 per person per year for gifts to clients. But, 100 percent of the cost of employee meals at events such as holiday parties and company picnics is deductible.
    11. Perks for your employees: Coffee in the office? That candy bowl at the front desk? 100 percent deductible. Lunch brought into the office can be fully deductible, while taking the team out for lunch is only 50 percent deductible.
    12. Club or organization membership fees: The organization must be business- or community-related, such as a chamber of commerce, trade association or a professional organization.
    13. Lawn mowing: If you receive clients at your home office, keeping the entrance to your house clean and presentable may be deductible.
    14. Childcare for solo professionals: If you’re a parent and have a home office but you need to meet a client outside the home, childcare is deductible. If you’re leaving the house to go shopping, it’s not.

    Related: 75 Items You May Be Able to Deduct from Your Taxes

    Just remember, you can’t deduct what you aren’t tracking. Prior to the 1980s, you didn’t have many options — record-keeping systems included paper, pencils and file cabinets. The late 20th century made spreadsheets an option, which required ensuring formulas were put into the correct cells as well as remembering where the related backup documentation was saved.

    The modern era has given way to even better ways of tracking information, and distilling years of accounting and bookkeeping know-how into an easy-to-use software platform. Now you can stay on top of all of the purchase orders, invoices and receipts you’ll need as a backup to your accounting records. And, have them all safe in a cloud-based system. Files, images, emails and scanned paper documents can be captured from a mobile device or a computer and stored safely online. You can categorize all transactions easily by account category and relevant tax schedule for subsequent reporting and filing.

    These systems can be accessed from anywhere your business takes you, from home office to factory floor to out-of-state business pitch. You can pull them up when needed (such as for a loan application, a meeting with your accountant or deciding on financing a business improvement).

    Consider financial document management solutions that can also automatically extract data from these documents. Instead of keying these numbers into a spreadsheet or paying your tax accountant to do this manual work, systems like Neat automatically feed financial data to accounting and tax software. These systems can make it easier to account for all of your business expenses — the obvious ones and those that can be often overlooked.

    Related: The Most Forgotten Tax Deductions Business Owners Should Take

    Jim Conroy

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  • Act Now on Your Year-End Tax Strategy to Save in 2023

    Act Now on Your Year-End Tax Strategy to Save in 2023

    Opinions expressed by Entrepreneur contributors are their own.

    Come January 3, a new Congress will convene in Washington, DC, setting the stage for potential tax changes that could impact small and medium-sized businesses. With that in mind, it’s important for businesses to engage in certain tax planning strategies and to take advantage of tax credits that will soon expire or be phased out.

    The Employee Retention Credit (ERC) is one such credit. Created in 2020 to provide economic relief during the Covid-19 pandemic, the ERC lets businesses claim thousands of dollars in refundable tax credits to compensate for losses experienced in 2020 and 2021 while they continued to pay employees. Businesses subject to a full or partial shutdown or significant decline in gross receipts can qualify.

    Many small and midsize businesses I know are eligible for two quarters or more of credits, which can range as high as $7,000 per quarter per employee in 2020, with higher per-employee limits in 2021. But the time frame for claiming this credit is shrinking. Start planning now.

    Businesses have just three years from the time they filed their 2020 and 2021 quarterly tax returns to claim the credit. Even if you received funds from the Paycheck Protection Program (PPP) previously you can qualify for the ERC credit, but you’ll need time to gather all the necessary documentation before filing the required amended return.

    Related article: How to Obtain the Employee Retention Tax Credit (ERTC) Under the Second Round of Covid Relief

    Beware of companies advertising huge ERC payouts that are “too good to be true,” as the IRS noted in a special warning. The agency further cautioned that “improperly claiming the ERC could result in taxpayers being required to repay the credit along with penalties and interest.”

    Know how to find someone who can help you if a problem arises. I had a client who signed a contract with a firm that promised an ERC credit twice as large as what we projected along with lifetime audit protection, but the firm was cagey about how to handle a prospective audit and did not list addresses and phone numbers. A red flag for sure, and a reminder that taxpayers should never get too greedy.

    The importance of tax planning

    How many business owners can honestly say their accountants are advising them on tax planning, like the ERC benefit, rather than merely doing their taxes? Is yours building a tax-strategy foundation that generates recurring savings year after year?

    Take the initiative and ask your accountant what plans they have in place to generate savings year in and year out, plus what strategies they’re using to accomplish that.

    Don’t make the mistake of merely asking your accountant how you can save on taxes just before the year’s end. If you do, you may be advised to buy a vehicle for your business because the cost can be fully written off using a bonus depreciation. This is not an example of a great, forward-thinking tax strategy. And that particular deduction, by the way, will lose 20% of its value in each of the next four years, starting in 2023. It’ll be completely phased out by 2027.

    Related article: How to Give Yourself a Tax Cut

    Accountants should have a plethora of strategies to help small and midsize businesses and their owners save on taxes. For example, ask yours about research and development credits, or credits for hiring veterans and disabled individuals and members of other groups that the government has identified as facing employment barriers.

    How to avoid an audit

    It’s more important than ever to use only legal ways to limit your tax liability. Here’s a list of some dos and don’ts:

    • Don’t put your family vacation on your company’s books. If there is a business purpose for a partial business/family trip and that purpose constitutes more than 50% of the trip, document it and proportionally deduct your costs. Include notes about the purpose of the travel, your itinerary, the agendas of meetings and conferences, whom you met with, etc. The IRS has heightened record-keeping requirements for travel deductions.
    • Keep original receipts, not just credit card statements. Taxpayers often assume a credit card statement constitutes a receipt. It does not. Your expense items on a credit card receipt only will likely be denied.
    • Get in a habit of documenting all relevant expenses while you’re incurring them; and consider assigning an employee for that purpose or use technology. You’ve got to document the business reasons for the deductions claimed because there are heightened documentation requirements for business travel and for meals. You probably won’t remember all these necessary details if the IRS audits you two or three years after an event has taken place. If you fail to document actual expenses, you should deduct IRS-published travel per diems by city.
    • Don’t pay personal expenses through your company. Write a check to yourself from the company for a legitimate reason like a salary, wages or distribution. Then pay personal bills for your mortgage and electric bill out of your checkbook, not the company’s.

    Related article: The IRS Hates Telling Entrepreneurs Anything About Taxes.

    The messages are slowly sinking in. Four clients so far have told me they’ve completely revamped their internal processes to take better records. They’re spending the time to do this now because they understand it could be riskier in the future.

    Nobody knows what tax changes, if any, are in store, but there are changes already on the books that business owners should be aware of, including benefits that are slated to disappear. Act now before it’s too late.

    Bruce Willey

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  • Are You About to Miss the Tax-Filing Deadline? File an Extension — Then Use NCFilesFree.org

    Are You About to Miss the Tax-Filing Deadline? File an Extension — Then Use NCFilesFree.org

    Press Release
    –


    updated: Apr 17, 2017


    Durham, NC, April 17, 2017 (Newswire.com)
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     Those struggling to file their federal and state income taxes on time may request an extension through this yearʼs deadline on April 18.

    The Benefit Bank® of North Carolina (TBB™-NC) offers free, easy-to-use online tax assistance at NCFilesFree.org. There are no additional fees or charges of any kind. TBB-NC is managed by MDC, a Durham-based nonprofit organization dedicated to eliminating barriers that separate people and communities from opportunity.

    Most volunteer sites shut down after April 18. It can be difficult to obtain free tax assistance after that date, but you can use NCFilesFree.org until your extension ends.

    Ralph Gildehaus, Senior Program Director.MDC

    “Many wait to file right at the tax deadline and extensions must also be filed by April 18,” says MDC Senior Program Director, Ralph Gildehaus. Taxpayers can visit IRS.gov and dor.state.nc.us and follow the steps to file an automatic six-month extension to complete their taxes by October 18. “Remember, if you owe money, you still need to pay the estimated taxes to avoid tax penalties and interest.”

    “Most volunteer sites shut down after April 18,” Gildehaus says. “It can be difficult to obtain free tax assistance after that date, but you can use NCFilesFree.org until your extension ends. You can even use this site to prepare up to three prior years of back taxes.”

    The system is designed to maximize refunds and help families claim the Earned Income Tax Credit (EITC). To qualify to use NCFilesFree.org, a household income must be less than $95,000 (filing jointly) or $65,000, (filing single). Users can also arrange for refunds to be directly deposited into their bank accounts.

    Other services offered by The Benefit Bank® of North Carolina include options to complete the Free Application for Federal Student Aid (FAFSA) and voter registration. Users can also screen for potential eligibility for work support programs, such as nutrition and health assistance.

    To learn more about free online tax assistance through The Benefit Bank® of North Carolina go to NCFilesFree.org. You may also call 2-1-1 for information about free tax assistance services that may be available in your community.

    Source: The Benefit Bank® of North Carolina

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