Operating a small or home-based business presents many unique challenges, but perhaps none so complex as taxes. Employees who receive a standard W-2 have it easy when it comes to filing. They don’t need to worry about deductions or where they do business. Unfortunately for small business owners, there are plenty of hurdles that must be scaled when tax season rolls around.
How do you determine the proper tax deductions? What address should you use for your business (a particularly relevant question for those based out of their homes)? How do you effectively separate business expenses from personal ones to stay out of trouble with the IRS?
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The Pandemic Changed More Than Just Our Daily Routines
What a year it’s been! The COVID-19 pandemic changed pretty much everything we thought we knew about the world, and it may be the reason you’re now operating a home-based business. It also added a bunch of new wrinkles in tax preparation, including Paycheck Protection Plan (PPP) funding and the impact of the CARES Act.
As we take a closer look at home business tax tips, it’s important to consider the ramifications of recent pandemic-related tax legislation and whether that will continue through 2021 and beyond. Clearly the biggest questions revolve around each type of relief, how those taxes will be applied, and whether other changes will affect future filings.
Best Home Business Tax Tips
Tax tips may save you big bucks, but how do you know which tips are legitimate and relevant to your business? In this article, we’ll take a closer look at some home business tax tips you should consider, but this should not be taken as professional tax advice, so consult your certified public accountant with any specific questions you have.
Write Off Travel Expenses
Travel can be one of the biggest perks of owning a business, but it can also be a costly endeavor. Sure, the freedom of traveling around the world is both fun and exciting, but if it’s done strictly for business, it’s legitimately deductible. Still, it may be a good idea not to let the IRS know how much fun you had doing it!
Airfare, hotel charges, vehicle rental, and business-related meals and entertainment can all be deducted as expenses, so make sure to keep careful track of all travel-related costs and save your receipts. It’s also a good idea to keep notes on your travel days so you can line that up with your receipts when filing your taxes.
Write Off Technology Purchases
If you’re an employee in a large office, you probably don’t give much thought to all the technology that goes into making you productive, but as a small business owner, you’re keenly aware of every expense and technology is probably near the top.
Computers, cellphones, printers, and software are a few things that may be written off. This is one of the most important home business tax tips, but as always, it’s important to distinguish between business and personal use.
Secure a Nevada Business Address
It’s very important to make a clear distinction between your home office and living space, and this can lead to headaches for home business owners fearful of an audit. The easiest way to clearly distinguish work from home is to use a business address rental service like Forward Nevada. We serve as your work address and this lets you focus your attention on more important things during tax season.
You don’t want to be worried about mail forwarding or having a change of address when you run a home-based business, but these are natural things people do when moving or traveling. With Forward Nevada, you’ll never have to worry about whether important mail is arriving at your current address because we handle those details for you.
Donate to Charity
Donating to charity is altruistic and gives us a sense of “giving back,” but it can also be a wise home business tax tip. Last year left many people in a bad financial situation, so if you’re considering a charitable donation, you can make it a win-win situation by turning it into a tax reduction strategy that not only helps your bottom line, but also builds your brand reputation. Even if it’s not related to taxes, always find a way to give back! You’ll find joy in helping those less fortunate than yourself.
Hire Family Members
That crazy uncle may be entertaining at dinner parties, but perhaps not so much as the public face of your business. However, if you own a sole proprietorship or partnership with a spouse, minor children could be a good business tax reduction strategy to keep more money in your family. Remember though, the kids must be legitimately employed with a specific job function, and this includes setting them up with W-2s and paying any applicable taxes.
Work with a Tax Accountant
A tax accountant is extremely valuable as they are well versed on tax law intricacies and changes. Tax laws evolve from year to year, and sometimes in very profound ways like we saw in 2020. However, even if you rely on a tax professional and don’t file your own business taxes, you may still want to register for an online tax software account. This allows you to calculate your own tax liability to preview your situation before you go into the tax preparer’s office in the spring.
Use Our Business Address Rental Service for Your Home Business
Taxes are a tricky thing and not something you want to deal with unprepared. Take the time to examine the best tips for your business and consider utilizing Forward Nevada for your business services. We can help you separate your business from home address, handle your critical mail, function as your Service of Process, and many other offerings. Contact us today to find out how we can help you succeed in these challenging times!