Sunday, January 20, 2013

Basic Tax Deductions for Small Businesses

For all the hard work that goes into running a small business, there are some distinct rewards that come from it as well. Not only is the work rewarding but small businesses owners can also take advantage of tax deductions not available to individuals. Let's look at some of the most common tax deductions available for small businesses.
Virtual Assistant
Your virtual assistant is completely tax deductible as a business expense - and the best part is that you don't have the hassle of handling payroll and figuring out with holdings and benefits - your virtual assistant takes care of all of that.
Home Office
The home office deduction is the most basic deduction that small businesses may claim. This deduction is to be used when there is an area in the home that is used ONLY as a business office. If the area is used for any other purpose in addition to an office, you cannot claim the deduction. The home office deduction has been controversial lately because it has earned the reputation for triggering IRS audits. However, this rumor is completely unfounded and any small business with an office in the home should claim this deduction without the fear of an audit. Since the amount of the deduction is based on the percentage of the home used for the home office, you need to know the entire square footage of the home as well as the square footage of the room used for the office.
Supplies and Equipment
All of the office supplies and equipment that are purchased for the business are also tax deductible. Who knew paperclips could be so valuable? Each time you go out for more printer paper, sticky notes, pens, etc., you should save your receipts because these expenditures offset the taxable income of your business.
Office equipment may also be deducted. Computers, printers, fax machines, even your cell phone or PDA are deductible if used for business. Equipment deductions can be claimed at 100 percent all in one year or may be depreciated over a period of five years.
Any office or business needs furniture. Luckily when you buy that computer desk or office chair, you can deduct it from your taxes. Furniture is also deductible at 100 percent in one year or it can be depreciated over 7 years. To deduct it all at once, a special form (Section 179) must be used. Depreciation is a little more involved because each individual piece of furniture has a different depreciation schedule. For example, the file cabinet has a different depreciation value for the year than the conference table. The conference table value is different from the lobby chairs and so on.
A Virtual Assistant can help you sort through receipts, categorize expenses and enter data in to an accounting program or spreadsheet to make your tax preparation easier. Consider a virtual assistant throughout the year to avoid long hours during crunch time.
It will probably pay off to consult with a tax professional to make sure that your small business receives every deduction to which it is entitled

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