Taxes are one of the most important issues facing small and growing businesses. And like a company's profits, its annual tax bill will in part reflect the owner's skills and knowledge. Business owners need to be sure that they are meeting all of their responsibilities to the tax man -- and also seizing every opportunity to reduce their taxes. These tax tips will ensure Uncle Sam is not getting more than his due.
- Writing It Off: Deductions. Businesses can deduct all "ordinary and necessary" business expenses from their revenues to reduce their taxable income. Some deductions are obvious—expenditures in such areas as business travel, equipment, salaries, or rent. But the rules governing write-offs aren't always simple. Don't overlook these potential deductions:
- Business losses. Business losses can be deducted against a business owner's personal income to reduce taxes. If a business owner's losses exceed personal income for the year, some of the year's business losses can be used to reduce taxable income in future years.
- Trips that combine business and pleasure. If more than half of a business trip is devoted to business, deduct the traveling costs, as well as other business-related expenses.
- Employee Taxes. If a business has employees, a variety of taxes will have to be withheld from their salaries. Among them are:
- Withholding. Social Security (FICA), Medicare and federal and state income taxes must be withheld from employees' pay.
- Employer matching. Businesses must match the FICA and Medicare taxes and pay them along with employees.
- Withholding. Social Security (FICA), Medicare and federal and state income taxes must be withheld from employees' pay.
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