What to Consider When Filing Small-Business Taxes

Author: Keith Huggett

Small-business taxes can be challenging, especially if you are new to it. On the one hand, you don't want to make incorrect claims that will raise red flags and prompt an audit. On the other hand, you don't want to be too cautious and leave money on the table. Learning the basics of small-business tax deductions is a good first step toward understanding how to walk this fine line.

The biggest challenge most business owners face when determining which expenses are eligible for a deduction is distinguishing between personal and business expenses. In many cases the answer is obvious, but these lines are frequently blurred, particularly for small-business owners. 

For purchases, if the item was purchased for business use, it is usually deductible. However, there are some exceptions or special situations such as cars or computers that are used for both business and personal reasons. In these cases, it's best to work with a tax professional to ensure that you make the deduction correctly. You should also consider keeping a usage log for these items in case you need to support your claims in an audit.

Travel expenses can also straddle the line between business and pleasure. The IRS has very specific requirements for defining a business trip, and it is important to understand these when preparing your business taxes. The regulations do change on occasion, so check with your accountant before you make any incorrect assumptions about the tax code. 

Another red flag for the IRS is business between relatives. You can certainly claim legitimate deductions for expenses paid to other businesses, even if they are owned by relatives, but be prepared to justify the deduction; the IRS takes note of these types of transactions.

The Tax Office Inc. is here to help you navigate the sometimes confusing world of business taxes. Whether you need tax help on a monthly, quarterly or annual basis, our trained professionals can save you time and money. Contact us today to learn more.