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Tax Tips Small Business

Starting Your Own Business?

Here are a few quick tips to help you reduce taxes

Open a separate business checking account. Many small business owners don't realize the complications that can arise from using their personal checking account to pay for business expenses. If business expenses are mixed in with personal expenses, the IRS may disallow them.

Small Business Quick Tip

The Social Security wage base increases to $106,800 in 2009 and 2010. This means that you are no longer required to withhold social security tax for employees after meeting this threshold. However, you are required to withhold Medicare taxes regardless of the amount of wages paid.

Turning Interest Payments Into Tax Deductions

Make interest payments work for you, not against you

You can deduct business-related interest on your business return if you used the borrowed funds to purchase business supplies, equipment, services, etc. Co-mingling business and personal expenses makes it difficult to determine what amount of the interest is business versus personal. If this happens, the IRS may consider the entire amount as nondeductible personal interest and disallow the deduction. Therefore, keep all business purchases made with loans and credit cards clearly separate from your personal expenses. Use a separate credit card for your business to make it easier.

Also, make sure to tell your tax professional if you use home equity debt for business expenses. He or she will be able to determine how much of the interest you can elect to deduct directly against self-employment income.

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Wednesday, 08 September 2010

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Tax Tips Personal

Take Advantage of Tax Savings in a Down Market

Know when you have a deductible loss

Just because the stock market lost money, doesn't mean you have a deductible loss. As long as you hold on to an investment, you only have a loss on paper. It's only when you actually sell the investment that you have a transaction to report on your tax return.

Fortunately, the tax law allows you to offset your capital gains by your capital losses. You can avoid or minimize taxable gain by selling two investments, one at a gain and the other at a loss.

Personal Quick Tip

If your tax refund was too high or too low, adjust your withholding so it doesn't happen again next year. You can file a revised W-4 with your employer at any time to increase or decrease the number of exemptions you claim. The more exemptions you claim, the less tax your employer withholds from your wages, resulting in a smaller refund. Decreasing the number of exemptions results in more withholding and a larger refund.