Taxes are complicated for the average person, which is why tools such as TurboTax exist. Meanwhile, small business owners are left to fend for themselves, hunting for an affordable tax professional or struggling through tax time alone. The sad truth is, going it alone may lead to overpayment of your taxes in the amount of hundreds and even thousands of dollars.
“Numerous businesses overpay their taxes every year by overlooking various tax deductions,? said former IRS revenue officer Michael Raanan, who is now president of Landmark Tax Group. As Entrepreneur magazine reports, it usually comes down to two major problems:
- Being unaware of available deductions
- Neglecting to keep detailed records or itemizations
To combat these problems, there are some key strategies to avoid overpaying your small business taxes for 2015:
- Crunch your expenses. Save all receipts from business lunch, dinner and coffee meetings, and make notes on the receipt about what was discussed. If you do this as you?re signing the bill each time, it won?t be as much of a job to when tax time arrives. Track your business-related miles driven using a handy tool like MileIQ – it?s great for tracking your employees? business-related drives for reimbursement, too! Other employee expenses that you reimbursed can also count for tax deductions.
- Take larger deductions on equipment purchases. When you buy larger items for your business, such as furniture, computers and other equipment, the IRS generally stipulates that you must depreciate the items to deduct only a portion of the cost each year. However, you can use the special depreciation allowance and take 50 percent of the item?s cost for a deduction in the year you purchased it (2015). In some cases, you can use the Section 179 deduction to take a full deduction and skip the depreciation!
- Deduct household expenses (for home office applications). If you operate some or all of your business from your home, you can deduct things like insurance, utilities, and even mortgage interest. It might seem best to just follow the simplified home office deduction, but as the Entrepreneur article mentioned earlier notes, it might save you more money (in the amount of thousands!) to do the work and crunch the numbers manually.
- Don?t forget to deduct your startup costs! If you started your business last year, you are likely eligible for the IRS tax deduction of up to $5,000 of your startup costs. Common startup items include furniture and equipment, supplies, and installation fees.