Part of the series: 10 Small Business Tax Mistakes (Based on IRS Guidance) How business owners pay themselves depends on the business’s legal structure. Different entity types have different rules for compensation and tax reporting. IRS guidance explains that sole proprietors, partners, and S corporation owners follow different rules when paying themselves from the business. … Read more
Part of the series: 10 Small Business Tax Mistakes (Based on IRS Guidance) Some business expenses involve both personal and business use. When this occurs, only the business portion of the expense may qualify as a deduction. IRS Publication 463 and IRS Publication 587 explain that certain expenses must be allocated between personal and business … Read more
Part of the series: 10 Small Business Tax Mistakes (Based on IRS Guidance) Business property used in operations may need to be depreciated over time rather than deducted all at once. IRS Publication 946 explains the rules for depreciating business property, including equipment, vehicles, and other assets used in the business. Depreciation allows businesses to … Read more
Part of the series: 10 Small Business Tax Mistakes (Based on IRS Guidance) Proper documentation is an important part of maintaining accurate business records. IRS Publication 583 and IRS Publication 463 explain that taxpayers must keep records that support the income and expenses reported on a tax return. Certain expenses, such as travel, meals, and … Read more
Part of the series: 10 Small Business Tax Mistakes (Based on IRS Guidance) Some tax provisions allow business owners to defer or reduce taxable income through qualified accounts. IRS Publication 560 and IRS Publication 969 explain the rules for retirement plans and Health Savings Accounts (HSAs). These accounts allow eligible individuals to make tax-advantaged contributions … Read more
Part of the series: 10 Small Business Tax Mistakes (Based on IRS Guidance) Worker classification is an important part of complying with federal tax rules. IRS Publication 15-A explains that businesses must determine whether workers are employees or independent contractors based on common law rules. This determination affects how wages are reported and whether employment … Read more
Part of the series: 10 Small Business Tax Mistakes (Based on IRS Guidance) Business expenses can reduce taxable income, but spending money solely to reduce taxes does not automatically improve a business’s financial position. IRS Publication 535 explains that ordinary and necessary business expenses may be deductible when they are directly related to operating the … Read more
Part of the series: 10 Small Business Tax Mistakes (Based on IRS Guidance) Accurate financial records depend on tracking activity across all accounts used for business purposes. Internal Revenue Code §6001 requires taxpayers to maintain records sufficient to establish the income and deductions reported on a tax return. These records must reflect all financial activity … Read more
Part of the series: 10 Small Business Tax Mistakes (Based on IRS Guidance) Accurate records depend on tracking all business income and expenses. IRS Publication 535 explains that businesses may deduct ordinary and necessary expenses related to operating the business. To claim these deductions, expenses must be properly recorded and supported by documentation. When expenses … Read more
Part of the series: 10 Small Business Tax Mistakes (Based on IRS Guidance) Small business owners are required to maintain records that clearly show business income and expenses. IRS Publication 583 explains that businesses must keep records that support the amounts reported on tax returns. These records must show income, expenses, and other financial activity … Read more