Are you sure your business is claiming all the tax deductions to which it is entitled?
We have handled millions of tax returns over the years at Liberty Tax Service, and below are a few of the deductions we notice that business owners often miss.
- Start-up costs. Did you travel or use a consultant when you were investigating setting up your new business? These costs could be expensed or amortized. Along with travel costs and consultant fees, other examples include: expert fees such as a CPA or attorney, meals and entertainment for meetings, mileage expenses and vehicle tolls. State fees for establishing the business entity and franchise fees should also be considered.
- Interest. While we’re on the topic of starting your business, you should know that money borrowed money to start the business, can be recorded as a business liability and interest expensed accordingly. If you 'loan' money to the business, this loan should also be recorded as a liability with interest expensed. Promissory notes should be on file to cover owner loans to the business.
- Wages and payroll taxes. Consider paying yourself wages rather than distributions or dividends. If your business entity is an S Corporation or C Corporation, definitely pay wages rather than distributions or dividends if this business is your primary job. By so doing, you will avoid payment of self-employment taxes on your personal tax returns and can pass the payroll tax deduction to the business.
- Health Insurance. Depending on the type of business entity, many business owners miss the self-employed health insurance deduction on their personal tax return. This can be a significant deduction and include insurance paid for you as well as your family.
- Retirement Plan Contributions. Again, depending on your type of business entity, your business or personal tax return can be affected by retirement contributions over and above a typical IRA contribution. Businesses can establish inexpensive 401(k) plans including higher contributions for owners. Establishment of a SEP IRA is another alternative. These plans can result in significant deductions as well as increase your retirement savings.