As the owner of a small business, tax time can be stressful. If you've just found out that you owe more than you expected to this year in taxes, you may be struggling to figure out how to budget this appropriately for next year. The good news is that a little bit of advanced planning now will help you to avoid this problem next year. Here are some deduction options to discuss with your accountant.
Hire Family Members
If you own a sole proprietorship, one of the best things you can do to reduce your business tax liability is to hire your family. If you put your spouse and older kids to work at the business, you can pay them for their time. This generates an expense that you can write off on your business taxes and still keeps the income in your household. In fact, if you hire your spouse to work as an equal in the business, you can pay him or her a salary similar to yours, improving your household income and reducing the business tax liability.
It's important to remember, though, that you can only pay your family members if they have an actual job. You'll have to hire them for a specific position, and what you pay them should be an equivalent amount for that position at any other business.
Look for Personal Use and Home Office Deductions
It's common for small business owners to use their personal vehicle for work tasks and to work in a home office sometimes. This provides you with the opportunity to deduct mileage as well as home office costs, including maintenance and utilities for the office space, but only if that office space is used solely for your business work and nothing else.
If you want to claim deductions like this, make a plan to start tracking the mileage for every business-related trip that you take in your personal vehicle. That way, you'll have a log that you can use to claim the Internal Revenue Service mileage deduction.
In addition, you'll have to determine the square footage of your office space as compared to the total square footage of your home. If your office is ten percent of your home, you can write off ten percent of your mortgage, insurance and utilities for business use if the space is only used for work.
While these options can often help you save significantly next year, it's important that you claim the deductions properly. If you don't have the understanding of the process or the specific rules, talk with a CPA for more guidance.
To speak with a CPA, contact a business such as Amos Maney & Payne CPA's LLC.