While small business may realize they might deduct expenses for supplies and products from their income for the tax year, they often forget to benefit from other allowable deductions, like mileage and entertainment costs. Small business also may not realize they need to pay taxes quarterly, instead of annually. Knowing a couple of important tax tips will help small businesses reduce their tax liability, thereby increasing profits and growing their businesses.
Mileage
Any business related trip might help reduce your business tax liability because all business related mileage is tax deductible. You will be able to include all tolls and parking costs on this tax deduction. To consider this deduction, you need to keep a mileage log that features the miles you drove, what your mileage was, any parking expenses or tolls paid and the trip’s purpose. At the conclusion from the year, add together your mileage and multiple it by the Irs (IRS) mileage tax rate. The tax rate for 2010 was 50 cents per mile. Check the IRS website for that proper mileage rate for that tax year.
Entertainment Expenses
If you possibly could prove the expense is legitimate and for business purposes, you can deduct fifty percent of entertainment expenses. This could include meals which you had to eat during company business, as well as luncheons you could have prepared for clients. Keep all receipts for any of these expenses.
Pay Taxes Quarterly
If your business taxes will exceed $500 every year, you need to pay estimated taxes quarterly. Estimate your taxes by subtracting your expenses from your income and applying that profit for your federal and state tax rate. Should you neglect to pay your taxes quarterly, you could have income problems at the conclusion on the year when your tax liability one is the most than you expected.
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