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Daniel Kehrer

Guide to Tax-Saving Strategies

How to find and use all of the tax deductions your business is due

By Daniel Kehrer, Editor, Business.com & Work.com

In business, you have to spend money in order to make money. And the more deductible expenses you have, the less you pay in taxes. The trick is in recognizing what's an allowable business deduction and what's not — and in keeping the right records. Deductions are only as good as the records you keep to back them up. Any expense you forget to deduct, or lose because you can't back it up, costs you dearly. Your strategy should include a basic record-keeping system, business checking account, appointment book, expense journal and support documents such as receipts. You'll need to track inventory if you make or sell merchandise. And if your business has employees, you need complete payroll and payroll tax records. Key small business deductions include:
  1. Startup expenses: Some can be deducted immediately; others over 15 years. A special tax rule lets you deduct up to $5,000 in startup expenses your first year.
  2. Business operating costs: These include all of the "ordinary and necessary" expenses you incur that are related directly to operating your business.
  3. Hired help: This includes money you spend on independent contractors as well as employees.
  4. Travel and entertainment: You can deduct a portion (usually half) of certain "business entertainment" costs.
  5. Vehicle expense: Business use of your car can be claimed as a per-mile rate set by the IRS.
  6. Retirement and medical deductions: Retirement plan contributions are a terrific small biz deduction. Plus, there are several ways to deduct the cost of health insurance premiums, depending on your business structure.
Business.com's "What Works for Business" blog is a great way to keep up with the latest solutions, trends and strategies for small and medium business — including other tax-saving tactics.

Action Steps
The best contacts and resources to help you get it done


Discover the latest tax saving updates for small business

Saving on taxes is often a matter of gaining access to the latest updates and changes.
I recommend: Small Business Tax News, a subscription service, is an excellent way to stay abreast of small business tax-saving strategies. Business Owner's Toolkit, a service of tax-specialist CCH, Inc., offers a huge amount of information and advice on business tax issues, available free online.

Head off sales tax trouble

New Web-based solutions make it simple for even a one-person business to compute and collect sales tax from anywhere in the country.
I recommend: Avalara offers Web-based sales tax compliance services for small business. The site has a free sales tax rate lookup and calculator.

Put IRS information to work in your favor

The IRS has a good small business Web site that is easy to navigate and covers every tax topic you can think of.
I recommend: Visit the IRS section for small business.

Bring in a tax-saving professional

A tax professional can help you sort out deductions and tax saving strategies.
I recommend: CPAdirectory.com lists CPAs nationwide. Find a tax pro by name, location or specialization. The site offers other tax-saving resources and advice.

Get lower-cost tax saving advice from former IRS employees

Enrolled Agents - many of them former IRS employees -- are federally licensed to offer tax-saving advice and prepare returns for individuals and businesses.
I recommend: To find an EA, visit the National Association of Enrolled Agents Web site.

Take an online small biz tax workshop at your own pace

The more you understand tax rules for small business, the less likely you are to miss deductions and overpay your taxes.
I recommend: The IRS Virtual Small Business Tax Workshop is designed to help new and existing small business owners understand tax rules. Online Learning and Educational Products from the IRS help you learn about business taxes at your own pace.

Tips & Tactics
Helpful advice for making the most of this Guide

  • Other possible deductions include training costs, business gifts, association dues, advertising, bad debts, fees, licenses, insurance and interest on business loans.
  • State governments are getting more aggressive in auditing businesses selling across state lines. Many are also changing the rules for what makes a business liable for charging sales tax.
  • At last count, 45 states, 4,696 cities, 1,602 counties and 1,113 other tax jurisdictions in the U.S. impose a sales tax of one type or another - almost 7,500 total taxing entities. And in any given year these jurisdictions make an average of 3,000 changes in rates and regulations.
  • To deduct expenses related to the business use of part of your home, you must meet these requirements: Your space at home must be used exclusively and regularly for your business or trade. Plus, the business portion of your home must be your principal place of business, a place where you meet or deal with patients, clients or customers in the normal course of business, or a separate structure (not attached to your home) that you use for your business.

The official source of Tax-Saving Strategies is the Tax Consultants page at Business.com

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Recommended Solution Providers

TurboTax: Tax Software
Tax preparation software.

ADP: Small Business Services
Provides tax compliance services to small business

Intuit: Small Business Software
Accounting and tax software.

Tax Deductions: Tax Saving Strategies Course
Classes in tax saving strategies for small business and personal finance.

Corcoran Service Group: Tax Services
Provides tax services to small businesses.

BTB Tax Service Online:
Specializing in small business consulting, bookkeeping, and taxes.

Best Sites to Learn More

IRS: Small Business and Self Employed Resources
Advice, tips and resources for small businesses and the self-employed.

Small Business Taxes and Management: Articles
Tax references, special reports, IRS links and information on recent legislation.

Entrepreneur.com: Small Business Tax Center
Resources and information on taxes for small business.

About.com: Small Business Tax Information
Articles and information about taxes and small business.

AllBusiness.com: Taxes
Articles about taxes for small business.

SurePayroll.com: State Tax Information
Links to the Department of Revenue and Department of Labor in each state.

CCH: Business Owner's Toolkit
Forms and tools for small business owners to assist them with gathering tax information. Includes many links to tax forms and worksheets.

eZine: Taxes
Articles on taxes, many dealing with taxes and business.

BusinessChambers.com: Tax Articles
Articles and links with information about taxes and small business.

Best Blogs and Forums

Small Business Forums: The Taxman
Discussion of small business tax issues.

Tax Almanac: Discussion
Offers a place where you can ask your peers about your difficult tax-related questions.

Tax Policy Blog: Tax Information
News about taxes.

Tax Help Courses
Tax questions answered.

Don't Mess with Taxes: Tax Blog
Money news, notices, tips, commentary, insight and humor.



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