Whenever we decide to start our own business, chances are we will find ourselves (if we haven’t already) struggling to keep the boat afloat financially, and whether we obtained a business loan, or went to our family savings account in order to keep the funds flowing through the veins of our company, one of the main obstacles small business owners face during the first couple of years of our enterprise has to do with its capital.
You may not know this, but there are several tax return tips and tricks that might be useful, and that can help us receive some of the money we are investing in equipment and resources to keep our company working back to our business budget, allowing us to invest such money again, improving our operations, facilities, and therefore making our company more profitable.
Do Use Tax Software
One of the best ways to save money on our company budget is through purchasing tax filing software to help us with preparing and filing our tax reports online, and there are several options out there that will do so in an accurate, reliable, and timely manner. By doing so we can make sure that we are not being eligible for an IRS fine or penalty fee due to an error in one of our spreadsheets or paper reports that could have been easily corrected by using specialized software.
According to the IRS, online tax reports submitted online that have errors sum up to 1%, and reports submitted through paper go up to 21%, which makes online filing more accurate and reliable than paper. If you’re not willing to take the chances and 99% accuracy still won’t do it for you, hiring a tax specialist to double check the software reports wouldn’t hurt.
Home Office Is Deductible
A common situation among small businesses and young startups is beginning to run operations based on home office settings, as renting a dedicated space for our company might go beyond our initial budget or funding capabilities. Well, turns out this tight situation might be an advantage for you, since expenses that are generated by Home Office activities can be deductible, but you have to make sure that there is a room or a part of your home that is used exclusively for business, and never for personal use, in order for it to be a legitimate claim.
If you are not sure about what percentage of your home is actually being used for your business, there is a simple rule to get an accurate idea of how to divide the cost of utilities, rent, maintenance, mortgage, and any other house expense. All you need to do is measure your workspace and then divide that by the square footage of your home. This will give you a clear idea of just how much falls under the Home Office deduction.
Use Your Own Car Instead
Just as it happens with home offices, acquiring a designated car for our company may be a luxury that small business owners might not be able to afford during the first couple of years of operations, and using our own car is the only option available. Car usage for business can also be deductible from your tax return, just like when we claim a Home Office deduction, we need to calculate what percentage of our car use and expenses are generated by business operations.
We can determine how much we are using our car for business by keeping track of mileage that we drive for business and then divide that by the total mileage of the day, week, or month, however you decide to track it. We can take advantage of several apps to helps us keep our records as accurate as possible. This can also help us realize what percentage of gas, insurance, and repairs will be added to our business tax report.