Every entrepreneur knows that raising a business off the ground is no child’s play. Precisely when you need every penny to pay for expenses and, of course, yourself, taxes come in to destroy your income. Fortunately, there are certain ways that you can save on tax and use those resources to grow your business.
Are you overlooking crucial tax deductions?
Let’s start from the beginning. You had an idea. Good. You decided to act on it. That’s even better! You’d be surprised to know how many people don’t even get pass this step, but that is a subject for another day. Right from the get-go you will start spending money on various business expenses. Although your business is still not operational, you are still entitled to a deduction of up to $5000 for the startup costs. I don’t need to tell you that is a considerable amount of money for a small business. If the startup costs you incurred exceed $5000, they can be gradually returned over a period of 15 years.
When you are starting your business, you will most likely be working from home. A recent study shows that around 50% of small businesses are home based. But how can this benefit you? If you meet certain criteria required by the IRS, you are eligible for tax deduction on expenses such as maintenance costs, utilities, etc. It doesn’t matter if you are living on a rent or in your own house. What’s very important here is that whatever room or rooms you choose for business must remain exclusive for that purpose. You cannot put a laptop in your bedroom or kitchen table and call that your home office. That will not fly with the IRS. Whatever room you commit to this must be used only for your business, otherwise don’t even bother to file for a home office deduction.
I think we can all agree that interest is bad right? Yes, of course when you owe it. If you happen to purchase business necessities with your credit card, you are entitled to deduct the interest as a business expense. With interest rates rising, this will also save you hard earned resources.
Why is it important to choose the right CPA?
It is more than obvious that you will save a ton of money by choosing the right CPA for your business. As a small business, you cannot afford to make hiring mistakes. There are a few key features to look for in a CPA.
Logically, the first one is certifications. The CPA of the candidate and other qualified certificates he or she might possess like ABV (Accredited in Business Valuation), PFS (Personal Financial Specialist), etc.
Then it is of critical importance that you hire someone that has previous experience in the industry that your business is operating under. As a small business owner, you would want to focus on growing the company rather than explaining to the accountant whatever it is he or she doesn’t understand. One of the few assets you have is time, so don’t waste it!
Some accountants offer more than others. If you choose the right one you will not only get preparation of financial statements, but additional financial advice for your business. It is all about finding that thin line of balance.
Many small businesses fail at some point, because they cannot cover their expenses. Being aware of strategies that will get your company those critical several thousand dollars will get you further than you expected.