Tax Business Do’s and Dont’s
Tax Business Do’s and Dont’s by Mary Malazita
As a CPA, I handle all of our business mowners that are incorporated as corporations and partnerships; however I do not meet with everyone who is self-employed and files a Schedule C. As a sole proprietor, there are many ways that you can minimize your tax liability. Some people have heard the business term “LLC” but do not know what this stands for. If you are self employed and receive 1099 income, incorporating as an LLC at a minimum should be something that you consider. The term “LLC” stands for Limited Liability Company and stands for the liability protection that you receive as an unincorporated business. If you incorporate as an LLC, your personal assets are protected from anything that arises from the business. This is the biggest advantage of filing as an LLC.
One way to minimize your taxes if you file a Schedule C is to invest in a SEP plan. The SEP plan is the retirement plan for self employed individuals. you are able to defer your contribution until the filing date of your tax return. Depending on the income of your business, you may be able to contribute more money to your SEP than you would be to your IRA. Julie is able to set up SEP plans for our tax clients. If this interests you, please ask your tax preparer.
As I have recently experienced two tax audits over the course of 2011, the best advice that I can give you is to retain all of your support. Schedule C audits are on the radar of the IRS. Although time-consuming, audits are not something to fear as long as you have the support for the deductions that you are taking. Auto deductions are a favorite of the IRS. You are entitled to claim either the actual expenses of the auto or the standard mileage rate. In tax year 2011, the mileage rate is split – from January 1 through June 30, you receive a deduction of $0.515 per mile and from July 1 through December 31, you receive $0.555 per mile. If you are claiming the mileage deduction, please have record supporting the mileage that
you drove for your business.
If you have any questions about your small business, please feel free to email me @ email@example.com. I look forward to seeing many of you again this tax season.