As a new business owner, you’ve got a lot on your plate, from creating a business plan to hiring employees, taxation, etc your to-do list is a hefty one.
Running a business might sound easy — but it isn’t.
Not only do you have to ensure that all operations are running smoothly, but you also need to manage and supervise different areas in your business, as well as individually running through them.
You’re not just the owner who oversees everything, but you also serve as the worker who must do all possible jobs available within your scope.
One such important area is your finances, specifically speaking, your taxation.
This article aims to help you with just that as we’ve set up a guide to help you sort out your business taxation.
1. Employees vs subcontractors.
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Differentiate your business’ employees from the subcontractors. Employees work regular hours in your company and have a stable status with their jobs as they get constant tasks and responsibilities. Meanwhile, subcontractors who are also referred to as freelancers are hired based on a project-to-project basis.
You’re going to have big trouble if you mix them up as the IRS can penalize you with large tax bills due to anomalies in the Medicare and social security taxes that these two separate workforce’s should have.
2. Ensure smooth and consistent payroll processing.
The IRS is very particular when it comes to the income tax that is imposed on companies and employees. This is why you need to have a well-knit payroll payment schedule so that you won’t miss deadlines and show irregularities with payments.
Doing so avoids you the hassle of paying for penalties. Employees might complete a W-4 form to set up their federal withholding.
Employers must then match the Medicare and social security payments of the employee. The money, or in this case, the salary, must then be deposited into the employees’ respective bank accounts, either monthly, weekly, or sometimes, quarterly.
3. Avail startup tax deductions.
This is very important for startups because you’re still starting and making ends meet. Good thing the government knows this as you can avail startup tax deductions. What these are is that you pay less for taxes as long as your company is still considered as a startup business.
You can even deduct up to a maximum of $5,000 on taxation bills for your business’ research and development costs, as well as with your employee training expenses and supply orders.
4. Claim depreciation costs.
Your business’ tangible assets such as equipment, machinery, and structures, depreciates in value through time.
This means that the tax you have to pay for them can also decrease because of their lower values. You’re able to spend less on taxes by claiming depreciation.
5. Deduct travel expenses.
Travel expenses are classified into two. These are official business trips and personal travel. You can reduce your company’s tax burden if you’re on an official business trip. But you can’t if it’s just for personal leisure.
You can use this to your advantage and label your personal travel as an official business trip. This way, you’re able to minimize tax liability. You don’t have to worry much about this as well because you can easily mix these up.
Taxes can suck the life out of your business. But it doesn’t have to be that way. That’s if you know how.
Hopefully, this article helped you in minimizing your tax liabilities so that your startup business can flourish to its ultimate potential.
Just remember to bring out your best, ensure consistency, and abide by the laws. When you do, then your new business will surely be reaching greater heights.