Best Practices for Small Business Taxes

Best Practices for Small Business Taxes

Running a business is no easy task, especially when you have to file taxes each year to ensure that you are in compliance with current regulations. Having the expertise of an accountant throughout the year and especially during tax season can relieve much of the stress you may feel at tax time.  

Making financial decisions for your business without consulting an accountant can put your business at risk and even cost you more money in the long run. However, if you make yourself aware of some of the best practices for small business taxes, you can ensure that your business operations are headed in the right direction.

Every business should have confidence in their taxes! We have done thousands of small business taxes at Motl Accounting and have here for you some of the best practices for small business taxes.

  • Hire an Accountant. Hiring an accountant will greatly benefit your business! Throughout the year, your accountant will track your income and spending ensuring that you don’t have cash flow problems, as well as monitor your gross and net profits. This way, when it comes time to prepare your taxes, you will have all you need to properly file.
  • Keep Records. Keeping accurate records throughout the year of all of your business transactions will ensure that your tax return is correct. With inadequate record keeping, you could be leaving out deductions or even putting yourself at risk for an audit. It’s best to invest in an accounting software to assist you with keeping track of all of your income and expenses.
  • Understand the Difference Between Net & Gross Income. Business owners often forget to take into account the difference between their net and gross income. If your product costs more money to make than you charge for it, you will lose money, regardless of how many units you sell. It’s important to know what your gross and net profits are so that you can better forecast and ensure that your taxes are accurately prepared.
  • Correctly Classify Your Business. By failing to correctly classify your business, you could result in overpaying taxes. Each business classification will have a different effect on your taxes, whether it be Limited Liability or Sole Proprietor. It’s important to consult with your accountant or attorney to discover the best classification for your own business.
  • Manage Your Payroll. The IRS typically checks every quarter to ensure that a business’s payroll taxes have been paid. Therefore, it is recommended that you hire a reputable company to assist with your payroll. Whether you are working with classic fax reporting, paper checks, or even electronic reporting and direct deposit, you will want assurance that yours is handled as it should be.

By properly filing your taxes, you can have confidence in the overall operations of your business. These are just a few practices that you will want to keep in mind when it comes to your own business taxes.

With that being said, if you are seeking an accountant to assist your business, please get in touch with us here at Motl Accounting. With years of accounting experience in the Chicagoland area, we would be pleased with the opportunity to provide you with our tax services that provides business owners peace of mind.

What You Need to Know About Employee 401(k) Plan Contributions

What You Need to Know About Employee 401(k) Plan Contributions

You might not know everything about employee 401(k) plan contributions, but if you’re an employer, it is your responsibility to understand the basics when you offer this benefit to your workforce. A 401(k) is one of the most common retirement investment options because it is a flexible way to build capital over the course of a career and the funds mostly get withdrawn from your paycheck. We have a Payroll Vault team that oversees the accurate disbursement of these funds from paychecks to 401(k) or retirement accounts.  Here’s what makes this type of plan unique and what sets it apart from other retirement options.

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The Advantages of Using a Personal CPA to File Your Taxes

The Advantages of Using a Personal CPA to File Your Taxes

What’s your favorite season? At Motl Accounting in Dundee, our favorite is tax season. It’s the time of year when you should be thinking about the best way to complete your business filing. There are a number of ways to do your taxes, but a personal CPA for your small business like Charles Motl will provide the quality of service you should expect from a customized tax filing. Business taxes are an entirely different animal than your personal filing; they can be much more complex. The more complicated your taxes are, the more you need help from a professional to avoid those unexpected and tedious mistakes that will ruin the start of your year.
When you work with Motl’s certified public accountants, you know that the American Institute of Certified Public Accountants has qualified our professionals to practice in your state. This distinction means the accountants have passed a rigorous exam and have the experience to complete a professional tax return with accurate deductions on your behalf. Many businesses that we service have tried doing their taxes on their own before realizing how much they may be missing out by not understanding the complexities of deductions and taxations. We recently assisted a Photocopy business in Chicago by reviewing a statement they received and helped them save around $1800 dollars by taking a second look at the statement. It’s natural to panic when you receive notices from the IRS or State government, but we provide the peace of mind in such situations. That’s what we pride ourselves on. This among many reasons is why it’s advisable to go with a CPA rather than doing it alone. Read on for some of the strongest benefits.

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The Dos and Don’ts of Charitable Tax Deductions for Small Businesses

The Dos and Don’ts of Charitable Tax Deductions for Small Businesses

Tax season is underway for businesses across the country, which means it’s time to start thinking about any charitable tax deductions for small businesses you’ve made that can reduce your tax burden. One of the most commonly claimed deductions is for charitable donations — about 75% of small business owners allocate a portion of their profits to charitable donations. There are many reasons to support charities beyond tax savings. Giving back reminds business owners that they can make a positive change in the world, and it’s also great for a company’s overall reputation. Learn how to go about smart small business charitable giving before you take action.

Do: Find a cause that aligns with your business

While it’s great to donate to any cause you’re passionate about, there are extra benefits to donating to charities that align with or relate to your business. For example, if your company sells the majority of its products for mothers, it makes more sense to donate to a breast cancer charity than one for disaster relief. Your customers choose your business for a reason, and donating to causes they’re likely to care about is bound to get them excited.

Don’t: Fall for a scam

Unfortunately, there are plenty of charities that masquerade as good causes, when they’re actually scamming good-hearted people, so it’s important to do your research before you give any organization your money. Even with legitimate charities, the majority of your contribution may be going directly to administrative, overhead and marketing costs rather than what is advertised. You can find out if a charity is valid and how your money is allocated by specific charities on Charity Navigator.

Do: Decide how you can help

There are a variety of ways to support causes beyond one-time monetary donations. Volunteer work, event sponsorships, fundraising and donating goods are all ways to make an impact. Each type of contribution must be recorded and filed differently, so it’s worth working with an accountant to ensure you get the proper tax deduction. The type of charitable work you should do largely depends on time commitments, the enthusiasm of your employees to participate and budgetary considerations. Don’t overcommit yourself — it’s not worth the headache.

Don’t: Forget to involve employees

If you’re unsure what type of charity makes sense for your business, it’s a good idea to ask your employees what they think is a worthwhile endeavor. If they care about a certain cause, they are more likely to feel enthusiastic about your company’s direction and want to participate. It is a great way to retain talent for your business and improve workplace culture. In addition to these benefits, getting your employees to volunteer or participate in fundraising makes your company eligible for additional tax deduction benefits.

Do: Publicize to customers

There’s nothing wrong with bragging about doing a good thing! Your current customers are bound to have a positive reaction if your company is giving back. If you publicize your charitable efforts, you may even attract new customers who believe in supporting businesses with philanthropic behavior. While this might not bring direct tax benefits, more customers is good for your bottom line, which no business owner will complain about. Consider the positive PR that comes with giving.

Don’t: Ignore paperwork

When it’s time to file your tax deduction, there are some important things to remember. Be sure that your charity is eligible for a tax deduction by using the IRS search tool and learn about the limitations of each type of charitable deduction on the IRS charitable contribution topic page. You must report your charitable contribution on Form 1040 Schedule A of your taxes before the end of the business tax year. Remember that your deduction cannot amount to more than half of your adjusted gross income. Always have your records of charity contributions close at hand, in case of a tax audit.

Business owners benefit in many ways from charitable donations, so including them in your next filing is a worthwhile goal. We understand that choosing the right charities, keeping records of your contributions and filing tax deductions is a complicated process. If you are looking for a helping hand when you’re giving back, our team can assist you with our business tax services to help reduce your tax burden as much as possible. Contact us today to get started with tax savings.

How Offshore Tax Havens Affect Small Businesses

How Offshore Tax Havens Affect Small Businesses

dollar-signThe U.S. Public Interest Research Group Education Fund recently published a study indicating that small businesses pay $5,128 on average in taxes per year to make up for revenue lost to offshore tax havens. Small businesses generally aren’t the ones taking advantage of offshore locations with low (or zero) taxes. Huge corporations are more likely to have the means and motivation to create corporate headquarters in offshore tax havens like Switzerland, the Cayman Islands and Singapore. The amount of federal money lost is staggering — $128.5 billion in corporate tax revenue is kept in foreign countries harboring offshore accounts for large companies. Unfortunately, this affects small businesses because they end up shouldering more than their fair share of the tax burden.

The problem only seems to be growing, as more large companies are considering the advantages of moving corporate offices to tax havens. While the ethics of such decisions are up for debate, there’s no denying that many businesses will save money on taxes any way they can. Without legislation to bar a company from abusing the availability of tax havens, the behavior is sure to continue. The current tax code tends to favor large conglomerates, while putting small and medium-sized businesses on the hook for more tax expenses. Globalization has created a race to the bottom for federal taxes as nations vie to attract international businesses.

It is still unclear what the future holds for corporate tax avoidance, but tax laws tend to change with new presidential administrations. Of course, it’s not just the president who debates tax policies, and the 115th US congress will need to reach a consensus on how to move forward with the growing problem. It’s not just accountants or small business owners who benefit from a stricter corporate tax system — the money that is sent to foreign countries could be used to directly benefit the general public. Infrastructure improvements, a strong national defense, education and paying down the national debt all rely on tax dollars.

As large businesses move towards increasingly international models, it’s important to keep a watchful eye on their behaviors. Chances are, most companies aren’t moving their corporate offices to micro nations because they think there are loads of potential customers there. Although technically legal, tax avoidance by multinational corporations disproportionately hurts small businesses, and that’s a problem. Small businesses face enough challenges as it is to get established in the marketplace. Making up for other companies’ tax avoidance is an extra obstacle for an already challenging endeavor. Thankfully, there are tax write-offs that the federal government encourages small businesses to use, and we can help you save as much as possible for your 2017 filing. Explore our tax preparation services to see what your business can do to level the playing field for taxes.

Business Tax Deductions You Didn’t Know Existed

Business Tax Deductions You Didn’t Know Existed

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There’s nothing worse than realizing you could have saved money on your taxes after you’ve already filed them. It’s easy to overlook some of the lesser-known deductions that exist, but doing so could cost you a pretty penny. Sometimes business owners wait until the last minute to do their taxes, and that rush prevents them from researching money saving options at their disposal. If you don’t have a tax planner by your side, you’re left guessing about your best options. Start keeping records of your tax write offs now, and your 2017 tax day will go much smoother.

Home Office

Your home office probably doesn’t have to be as complicated as you think. So long as you have a dedicated computer for work and a space to get business tasks done, you can probably make a home office deduction on your taxes. That square footage isn’t the only thing that counts as business expenses – your mortgage, electricity and insurance costs count as well. Some people worry that a home office deduction is a red flag that invites an IRS audit, but if you are actually using it for business you have nothing to worry about.

Furniture

Buying office furniture may seem like a big investment initially, but it can save you money come tax day. Your office chairs, tables, filing cabinets and desks are all deductible if you’ve purchased them since your last tax filing. There are several types of furniture deductions you can take utilize. You can either deduct the total cost of the furniture at once, or you can reduce your tax burden incrementally over seven years. Base your choice on when you anticipate benefiting from that money most.

Driving Expenses

Hitting the open road doesn’t have to hit your pocket book hard. If you keep careful records of your driving miles, the government is more than willing to give you a break on your taxes. Some things you’ll want to keep on record are dates, miles driven, parking expenses and explanations for your trips. Make sure to keep your receipts on hand if you don’t have a receipt-scanning app on your phone. When you have that information at hand, you can easily save some money that would otherwise be gone forever. Gas mileage deductions vary by year, and for 2016 they are at 54 cents per mile driven.

Travel Costs

If you’re a frequent business traveller, you stand to save a significant amount of money with your expenses. You can deduct the total cost of your hotel stays from your taxes, so it’s worth springing for a few extra stars if you have the opportunity. Planes, trains and car expenses don’t have to set you back either. Exactly 100% of those costs can go directly towards deductions. That includes related expenses, such as tipping your flight attendant or visiting a laundromat while on the road. You can even write off your meal costs while travelling, albeit at a reduced deduction rate of 50%.

Education

If you want to be a master of your trade, you need to have the smarts to compete. Luckily, if you have education costs, you can write them off of your taxes if they relate to your current job. The IRS is strict about this write off though; you can’t own a bakery and go to school for your Masters of Architecture free of charge. If you want to improve your skills for your current position, this tax break gives you the chance to expand your career in a way that’s financially sensible. If you believe the best business owners are always learning, this incentive might be for you.

When it comes to taxes, every business owner wants to minimize their expenses. Tax deductions give you the chance to save money on the things you’d probably buy anyways, so it’s a no-brainer to take advantage of them. Of course, the examples above are just a few of the tax write offs you should be aware of. Our experts can help you reduce your tax burden, and ensure you won’t miss any deductions for the upcoming tax season. When we provide tax services, we work with businesses through the entire year, so no tax saving opportunity slips through the cracks. Learn more about our tax preparation services, and call today!