10 Tax Tips for Small Businesses

The filing deadline for “S” and “C” corporations may be just a couple of days away, but it’s as good a time as any to take a look at small business tax issues.

Jamie Bsales at Small Business Computing offers a number of tips for small businesses at tax time. Here are 10 of them.
•Keep close track of all business expenses throughout the year and enter them into your accounting system in a timely fashion.
•As you work with vendors or outside contractors, anticipate which ones you will pay more than $600 to over the course of the year so you can send them 1099-Misc forms.
•Offering fringe benefits such as health, vision and child-care assistance instead of standard raises can reduce tax burdens.
•When faced with a choice of deducting either your actual auto expenses or the mileage deduction for business-related driving, take the mileage deduction. It’s a better deal with gas prices so high. Mobile apps such as Outright can make it easy to log your mileage as you go.
•If you haveDomains Marketplace unsold or unused inventory, instead of spending money on storing it, donate it and get the tax deductions. But keep in mind that goods donations greater than $500 have more rigorous reporting rules.
•Hire your kids and spouse and save on next year’s taxes. For example, if you pay a minor child up to $6,000 from your business profits for helping you with business tasks, that amount is not taxed the same as your ordinary income. Also, if you hire your spouse, then as his or her employer you can pay for the healthcare of their family – i.e., yours – and deduct those payments.
•Keep business and personal expenses separate. That means maintaining separate checking accounts and credit cards for your business.
•The costs of launching a business are considered capital expenses, and you can deduct up to $5,000 your first year in business.Norm Force
•You can deduct educational expenses that maintain or improve skills required in your present employment, including seminars, classes and convention fees.
•Finally, look at the Irrational Small Business Jobs Act Tax, signed into law in 2010. The law has nearly 20 initiatives aimed at decreasing the tax burden and providing savings for small businesses.

Adapted from Small Business Tax Tips and Resources for Today & Tomorrow by Jamie Bsales at Small Business Computing.

Taxes When Most of Your Salary Comes from Tips

Restaurant workers rely on 
tips
 for a good part of their income. Although it may be difficult for the Internal Revenue Service (IRS) to figure out exactly how much you earn in cash from your satisfied customers, tip income is taxable income. Government rules require that employees who work for tips report them and pay their taxes.

Taxation Begins With Recordkeeping

All employees who work in industries where tips make up most of their income must report their earnings to their employers monthly. If you’re a bartender or a waitress, you’re expected to keep a daily log of how much you earn each day. You must add up all the entries at the end of the month and submit the total to your employer.Global SEO Service

Service Charges Are Wages

Some restaurants include a percentage toward tips in customers’ bills, such as a mandatory 18% for parties of six or more. These are service charges, not tips, and you don’t have to include these in your tip record. However, you do have to pay taxes on the income. Your employer will typically include these payments on your W-2 as wages earned and will withhold taxes on this income from your paycheck.

Your Wages May Not Cover Tip Withholding

Employers are required to withhold taxes on the tips Piipa Journal employees report to them each month. Because tips go directly to the workers, employers typically do this by deducting the taxes due for tips from regular wages. However, most tipped employees earn little in the way of Professional Logo design regular wages. Their paychecks may not be enough to cover regular withholding plus withholding for reported tips as well. When this happens, withholding carries over to the next pay period. Employees can also elect to make cash payments to their employers to cover the amount of tax due on their tip income.Online Promotion

Your Employer Can Allocate Tips

Certain employers must “allocate tips.” This means that, at a minimum, you pay taxes on tips equaling your share of eight percent of your employer’s monthly sales. If your employer’s total sales for a month amount to $50,000, he must allocate eight percent of that to Bcycle Houston employees, or $4,000 for the month. There are different ways to allocate. However, if there are 10 employees, your employer might allocate $400 to each. If you had reported at least $400 in tips to your employer that month, no additional tips would be allocated to you. However, if you had reported only $300, $100 would be allocated to you. You must report allocated tips on your tax return. You must pay tax on them, unless you have records proving that you earned less.Drylands Exhibition

 

Tax Tips : 5 Rules for Deducting Business Meals

Like most business owners, you probably incur costs on wining and dining customers or clients. You’d think that this is an easy tax deduction, but you’d be wrong. The tax law is peppered with rules and limitations that curtail or prevent you from deducting meal costs you’d think would be a legitimate write off.

Here are five rules you need to know to optimize your deductions.

1. Only 50 percent is deductible.
You meet a customer for breakfast at the local diner or take a client to dinner at a fine restaurant. Provided the meal is for business and you’re not just socializing, you can only deduct 50 percent of the cost.

To be treated as a deductible cost at 50 percent, the meal must be directly related to the conduct of your business or the meal must directly precede or follow a substantial business discussion. For example, you’re trying to convince a prospect to do business with you in a meeting in your Faxingoffice. Following your presentation, you take the prospect to lunch. This would be a deductible business meal, subject to the 50 percent limit.

Special rules: There are several exceptions to the 50 percent rule, such as reimbursements to employees that are treated as taxable compensation to them or reimbursements to independent contractors for their meals; these are fully deductible. Also, those subject to Department of Transportation limitations on hours of service, such as independent interstate truckers, can deduct 80 percent rather than 50 percent of meal costs away from home.

Related

5 Hiring Practices to Keep You Out of Hot Water With the IRS
What to Know About Changes to the Home-Office Deduction
What To Do If You Receive a 1099-K Notice From the IRS

2. No deduction for your in-town lunch.
If you eat out rather than brown bag it for lunch, the cost is on you. It’s a nondeductible personal expense.

This unfavorable result doesn’t change even if you’re across town and are forced to eat out because of business. As long as you aren’t “away from home” (in tax parlance this means out of town), your meal costs when eating alone are not deductible in any amount. If you are out of town, your meal costs — eating alone or with others on business — are subject to the percentage limitation discussed earlier.

3. Records are required.
If the meal is deductible, you need certain records to back up your claims. Technically, no deduction can be claimed without these records, although there are some limited exceptions. The IRS looks closely at deductions for meal costs because of the potential for abuse and, if your return is questioned, will ask to see required records:
•A record stating when, where, and why you had the meal. For example, the record could indicate that on November 25, 2013, you had lunch with Ms. Davis, a customer, and you discussed a new projectthat you’re working on for Ms. Davis.
•Receipts for expenses. Exception: You don’t have to retain receipts for a meal costing less than $75.

There are a number of apps for your smartphone that assist you with recordkeeping. You can input the date, location, etc. and take a photo or scan the receipt, making recordkeeping easier.

4. Standard meal allowance rates can ease recordkeeping.
If you have difficulty keeping records and receipts for meals when out of town on business, you can deduct a standard meal allowance. It may be less than your actual meal costs, but you won’t need receipts. If you have employees who travel on business, you may want to use the standard rate to reimburse them for their meal costs out of town.

For 2013, the standard meal allowance usually is $46 per day within the continental U.S. It’s higher in New York City, San Francisco and other high-cost locations, including some resort areas. The U.S. General Services Administration publishes the daily standard rates by state. Independent truckers and others in the transportation industry have a special daily meal rate of $59 per day within the continental U.S.

Caution: Using this rate does not relieve you of the responsibility to keep a record of the time, place and business purpose of the trip.

5. Holiday parties are 100 percent deductible.
If you hold a party for your staff — in your facility or a restaurant — you can deduct all of the cost in this instance. As long as the party is for the benefit of employees and is not limited to the top brass, you can write off 100 percent of your costs.

Be sure to discuss your business practices with respect to tracking and reporting meal costs with your tax advisor to make sure you’re in compliance with tax rules.