Crucial Tax Tips for Startups in 2016
As an entrepreneur, you need to have an eye for business. Many new business start-ups with little experience tend to focus on the front-end of the business—the merchandise, marketing and advertising, product and packaging—the things that make the business look pretty. However, when it comes to organizing the books, things can get a little disorganized.
Managing a business is more than just managing debits and credits. Taxes need to be accounted for. If you are selling retail goods, depending on which state you live in, chances are you will need to pay taxes on these items, whether you add these taxes to your product or not.
Even if you are providing services, when you’re operating a business, there are still tax matters that need tended to.
These days, with the assistance of advanced technology, many start-up businesses are conducted right out of a business owner’s home. As a result, the Home Office Deduction is one of the commonly known tax benefits for start-ups. Here, we’ll go over a few tax benefits that some start-ups can take advantage of as well as any amendments that may have occurred.
What You Need to Know about Home Office Deductions
When filing your annual taxes, if you operate a business from home, you are able to take advantage of a deduction. There are certain stipulations though. You must have a dedicated space in your home that is for business use only. This means that you’ll most likely need to turn one of the rooms in your home into an office. Additionally, your home business needs to be somewhat successful, no matter how low the profit margin is.
Knowing What Kind of Office Equipment and Supplies to Deduct
There are other office-related items that you can write off. The key here is that these expenses must be used specifically for business-related purposes. Here is a short list of some of these items that are self-explanatory:
- Start-up costs
- Office supplies, furniture, and equipment
- Software and subscriptions
- Retirement contributions
Phone / Mobile Phone charges
It should be clarified that the expense of the mobile phone for personal use or game playing shouldn’t be written off in your taxes. It is important that you have a dedicated line to your business.
Take Advantage of Business Trips
Any place you travel to and for business-related purposes, what you’ve paid for meals, parking, tolls, and the like can all be written off as a business expense. So, it is imperative that you acquire the receipts for all of these expenses so that you have tangible proof your expenses are legit.
Recognize the Gift of Giving
Any charitable contribution, whether you are operating a business or giving from your personal bank account can be written off. You just can’t claim one charitable contribution for both.
This is one the tax benefits that many entrepreneurs might not know about. According to Entrepreneur, if you are operating as a sole proprietor, and you have children 17-years-old or younger, you can legally put them to work by providing on-the-job training. Wages going toward these employees do not require paying any social security taxes.