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Small Business Income Tax Guide
Business Tax Tips to Use on Your Tax Return
(Summer, 2003)
Is a Limited Liability Company Right for Your Business?
The Limited Liability Company or LLC form of business
organization is relatively new but rapidly growing in popularity among
small business owners. It offers liability protection from business
operations similar to that of a corporation, but allows owners to choose
from two or more options regarding how the business is treated for tax
purposes.
See the Full Article for
details.
Keeping Tax Records for Your Business
The business owner must keep any records related to
operation of the business that document transactions reported on tax
returns. This includes records of all receipts, such as customer
invoices, and of all expenses, such as purchase receipts from vendors.
See business records tips in the
Full Article
Does Your Business Meet the IRS Definitions for a
Business
or Are You at Risk of it Being Classified as a Hobby?
The answer to this question is critical, because it determines whether
and where on your tax return you can take write-offs for business
expenses. IRS auditors look for part-time activities that may be
designed to shelter other income from taxes rather than turn a profit on
their own. Full Article
How to Write Off 100% of
Business Asset Purchases This Year!
The 2003 tax cut bill increased the
amount of new business equipment that can be fully written off in the
first year to $100,000, with some restrictions. The law also added a
new optional bonus depreciation write-off of up to 50% of the purchase
price for business assets. But taking the bonus depreciation can
complicate bookkeeping for business in states that do not recognize the
bonus federal depreciation.
Full Article
Can You Write Off Your SUV?
Here's a business tip -- vehicles that weigh more than
6,000 pounds loaded and are used more than 50% for business can generate
substantial first-year tax write-offs. BUT, there are some cautions
to consider.
Full Article
Business
Start-Up Costs Must be Amortized
Costs that you incur in setting up an active trade or business, or
investigating the possibility of creating or acquiring a business, are
considered business start-up costs. A business tip -- these costs are amortized rather than
depreciated, over a period of not less than 60 months. Franchise fees,
goodwill, and customer-based intangibles are also amortizable.
Starting a Pension Plan - Small Businesses May Qualify
for a New Tax Credit
If
you are an eligible employer who begins a new pension plan for employees
of your small business, you may be eligible for a tax credit. The credit is 50% of the
first $1,000 of qualified start-up costs of the plan. The credit is
available for each of the first three years of the plan.
You
are considered an eligible employer if, during the preceding year, you had
100 or fewer employees who received at least $5,000 in compensation.
Qualified start-up costs are any ordinary and necessary expenses you pay
out to begin or administer a plan or to educate your employees about the
plan.
Reduce Small Business Tax Burden by Hiring Family Members
Hire
your children to work in your small business and shift some income into a
lower tax bracket. Another tip -- Hire your spouse and reduce your self-employment
tax by offering employee benefits.
Full Article
New Meal Cost Deduction Rules for Day Care Providers
The IRS has
issued simplified, flat-rate meal cost rules for day care providers that
greatly simplify the calculation of meal cost deductions.
Full Article
Business Credit for Providing Day Care Facilities to Employees
If you provide day care facilities and
services for your employees, you can receive a tax credit of 25% of the
qualified expenses you paid for employee day care and 10% of qualified
expenses you paid for day care resource and referral services. This credit
is limited to $150,000 each year.
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What to Do with Bad Debts
If you are
an accrual basis taxpayer and you have been unable to collect money
owed to you or your business, you may be able to deduct it, provided
you have a tax basis in the debt. Cash basis taxpayers normally do
not report income until they receive payment, so they do not have a
tax basis in the debt and cannot take a deduction. |
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Medical Savings Accounts
Certain
individuals who are self-employed and are covered by a high
deductible health insurance plan are allowed to establish medical
savings accounts (Archer MSAs). The distributions from an MSA are
tax-free if used for qualified medical expenses. |
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