To succeed in business, small business owners must keep a close eye on expenses. Poor expense management can destroy your profit on a project or business venture. A component of expense management is expense tracking.
If you’re not keeping track of your expenses, it’s easy to go over budget. Even if you’re still making a profit and don’t think you need to pay close attention to them, if you don’t have good records you won’t be able to take all your allowable deductions on your taxes.
How important is it to Track Business Expenses?
Without detailed, monthly information on your business’ performance, it’s easy to be running at a loss for several months and not even be aware. Cash flows which don’t align, such as customers pay deposits or large sums before you incur expenses on those projects, can mask your businesses true financial health.
During Small Business Week, the Internal Revenue Service reminds small business owners and self-employed individuals to take deductions and credits that will help their bottom line.
This year, National Small Business Week is May 5-11. For more than 50 years, the week has recognized the important contributions of America’s entrepreneurs and small business owners.
Reviewing options and eligibility now can help business owners better estimate their tax situation and plan ahead. Here are just a few key deductions and credits that can benefit small business taxpayers.
Qualified Business Income Deduction
Many individuals, including owners of businesses operated through sole proprietorships, partnerships, S corporations, trusts and estates may be eligible for a qualified business income deduction, also called the section 199A deduction. Some trusts and estates may also claim the deduction directly. Read More
The Tax Cuts and Jobs Act brought several improvements for small businesses, most notably, favorable accounting methods such as use of the cash method and not having to deal with the Unicap rules. The AICPA Tax Section recently posted a position paper noting 13 more changes that would further help modernize the Code to reflect how small businesses operate. Some of these would more completely simplify what Congress started with the TCJA.
For example, the TCJA increased the Section 179 expensing amount to $1 million, adjusted for inflation annually. But, despite the fact that intangibles are important to all sizes of businesses today (and for the past two decades), it only applies to tangible assets (and off-the-shelf software), not intangible assets, such as acquisition of a patent or domain name.
The Internal Revenue Service wants business owners and the self-employed to know that a publication on IRS.gov has information they can use to learn which recent tax-law changes impact their bottom line.
This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax, and the tax reform information page.
Publication 5318, Tax Reform: What’s New for Your Business, is a 12-page electronic document. Pub. 5318 provides a general overview of many of the Tax Cuts and Jobs Act (TCJA) changes enacted in December 2017 that impact business taxes.
Publication 5318 Includes Sections On:
- Qualified Business Income Deduction
- Business related losses
- Business related exclusions and deductions
- Business credits
- S corporations
- Farm provisions
- Miscellaneous provisions
A Few Key Provisions Include:
Small business owners, self-employed should plan now for new changes
With just a few months left in tax year 2018, the Internal Revenue Service today urges small business owners to learn about how the new tax law changes may affect them.
The Tax Cuts and Jobs Act, passed in December 2017, made tax law changes that will affect virtually every business and individual in 2018 and the years ahead. Among other things, the new law may change their tax rates and impact the quarterly estimated tax payments they are required to make during the year. Read More
This small business thought it was saving to invest in business expansion – Wrong, they were saving to be robbed by America!
This is the eighth in my series of posts about the Sec. 965 Transition Tax and whether/how it applies to the small business corporations owned by taxpaying residents of other countries (who may also have U.S. citizenship). These small business corporations are in no way “foreign”. They are certainly “local” to the resident of another country who just happens to have the misfortune of being a U.S. citizen. Read More
WASHINGTON – The IRS, state tax agencies and the nation’s tax industry are warning small businesses to be on-guard against a growing wave of identity theft attempts against employers.
Small business identity theft is big business for identity thieves. When businesses and their employees have their identities stolen, their sensitive information can be used to open credit card accounts or file fraudulent tax returns for bogus refunds. Read More
What Are The Important Updates One Needs To Know About U.S. Tax Reform?
The New Tax Bill “Tax Cuts and Jobs Act” presents the first major overhaul of the United States federal income tax system in more than three decades. The major benefits will be mostly felt by the large and small businesses. But what’s about tax reform’s impact on Americans overseas?
What Has NOT Changed For Americans Overseas?
- You can still use Foreign Earned Income Exclusion or Foreign Tax Credit to lower your tax bill. In 2018 a U.S. expat can exclude up to $104,100 of foreign earned income.
- The reporting requirements for FBAR stay in place: you need to file FinCEN Form 114 if you have an aggregate value of over $10,000 in any foreign financial accounts you own or have a signature over.
- FATCA and Form 8938 also didn’t have any changes (unfortunately).
Congratulations on successfully starting your business! If you’re ready to take the next step, but don’t know exactly how to go about that, here are some ideas for thinking about growing your business. Turn your business into a franchise – If your business model is easily replicated, and you want to see your business grow quickly, think about franchising. As the owner, now referred to as a franchiser, of the name or trademark sells that right to a franchise. Read More
Does your small business engage in qualified research activities? If so, you may be eligible for a research tax credit that you can use to offset your federal payroll tax bill.
This relatively new privilege allows the research credit to benefit small businesses that may not generate enough taxable income to use the credit to offset their federal income tax bills, such as those that are still in the unprofitable start-up phase where they owe little or no federal income tax.
This interview with Tax Lawyer and CPA Brett Thompson is part of our Tax Expert Series. We encourage you to interact with these experts at TaxConnections AskTaxQuestion.com. You are also encouraged to make comments below this post.
Kat: What is the number one problem faced by small business owners and/or taxpayers today?
Brett: Actually, you could ask what the number one problem is faced by all Americans today. Read More
The Protecting Americans from Tax Hikes Act of 2015 (“PATH Act”) significantly enhanced the Research and Development Tax Credit Program (“RTCP”) on a myriad of levels by making the RTCP a permanent tax incentive within the Code and considerably restructured the program to: Read More