small business taxes 101 for sole proprietorships
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Small Business Taxes 101for Sole Proprietorships
Tax laws and regulations change frequently, and their application can vary widely based on the specific facts and circumstances.
You are responsible for consulting with your own professional tax advisors concerning specific tax circumstances.
The Knoxx Group disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns.
What We Will Cover
• Filing Taxes– Tax Forms– Importance of Keeping Good Records– Proper Documentation– DIY Software vs. Professional
• Categories– Income– Cost Of Sales– Expenses
Form 1040 – Income Tax ReturnOne of the official documents that U.S. taxpayers can use to file their annual income tax return.
Schedule C – Profit or Loss from BusinessReport how much money you made or lost in your business.
Form 8829 – Expenses for Business Use of Home
Calculates the expenses related to using your home for business.
Schedule SE – Self Employment TaxCalculates the self-employment tax you must pay. Required if you earn net profits of $400 or more. Some of the payments are tax deductible.
Good Records
Good records are important for your business because they:– make filling in your tax returns easier and
quicker– make it quicker for you or your accountant to
do your taxes, which saves you time & money– provide information you need to manage your
business and help it grow– Is required by law
Documentation
Income• Sale Receipts• 1099-Misc• Bank Statements• Merchant Statements
(i.e. paypal, square)
Expenses• Receipts• Bank Statements• Inventory Records
D.I.Y. vs. Professional
DIY Software• Price is cheaper• Software can walk you
thru the process• http://
www.irs.gov/Filing/E-File-Options
Professional• Cost More• Detailed
understanding of tax laws to get you maximum benefit
Income & Cost of Sales
Income• Sales from product or services.
• Bartering for products or services.
Cost of Sales• If you make or buy goods to sell, you can deduct
the cost. • You must value your inventory at the beginning
and end of each tax year.
Expenses
• Accounting/bookkeeping• Advertising • Bank service charges and fees• Business gifts • Business meals (50% is deductible)• Computer, printer, and software • Consultant fees• Depreciation and amortization• Dues for professional and trade
associations• Education expenses for maintaining
or improving required skills• Email, Internet access, and web
hosting services• Fax machine
• Insurance expense• Legal and attorney fees• License fees and taxes• Merchant account or credit card
processing fees• Office furniture and equipment• Office supplies• Online services used for the business• Parking and tolls• Postage and shipping• Printing and duplication• Self-employment taxes• Start-up expenses • Telephone expense• Travel expenses• Vehicle
A business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted. A necessary expense is one that is helpful and appropriate. http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Deducting-Business-Expenses
Home Business ExpensesYou can deduct business expenses for your home if:• The part of the home used exclusively for business is your primary place of
business• You meet with clients, patients, or customers there for business purposes• You use the space regularly for storage facility or day care center
Based on Value of House and percentage of home used for business
• Mortgage Interest / Rent• Real Estate Taxes• Property Insurance• Repairs & Maintenance• Utilities
Resources
IRS – Business Deduction Websitehttp://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Deducting-Business-Expenses
IRS – E-filing Optionshttp://www.irs.gov/Filing/E-File-Options
Contact Info
R. Joyce Heard, CPA(615) 625-6211