You are previewing Tax Strategies for the Small Business Owner: Reduce Your Taxes and Fatten Your Profits.
O'Reilly logo
Tax Strategies for the Small Business Owner: Reduce Your Taxes and Fatten Your Profits

Book Description

Tax Strategies for the Small Business Owner: Reduce Your Taxes and Fatten Your Profits will help the small business owner increase profits while feeling more comfortable dealing with taxes. It begins by looking at the often overlooked critical decision small business owners face when they start a business: the choice of business entity. The book then examines all the deductions that a business owner can take legally to reduce taxes. It also provides advice business owners need to make good tax-related decisions: Should I lease or buy? Should I hire an employee or outsource the task? How much will buying a building reduce my taxes and for how long?

Many people freeze up when they are forced to prepare or even think about taxes. Some receive a notice from the IRS and put it aside: They're too scared to open it! Yet taxes for the most part follow common sense rules. You just need to know what they are and how they affect your decisions. In this book, readers will learn about the different business entities, the different taxes you must deal with (primarily income taxes), documentation procedures, how to work with a tax professional, how to handle an audit, and, in general, how to use the U.S. Tax Code to your advantage. Among other things, readers learn to take full advantage of tax benefits and avoid potholes hidden in things like:

  • Startup and ongoing expenses

  • Cost of goods sold

  • Depreciation

  • Payroll

  • Retirement plans

In short, Tax Strategies for the Small Business Owner will not only help you relax when you deal with your taxes—it'll show you how to use tax law to your financial benefit.

What you'll learn

  • How to choose a business entity that's right for your business.

  • The requirements for deducting expenses.

  • What you can deduct (and what you can't).

  • How to fund your retirement with help from the business.

  • Using depreciation rules to reduce taxable income.

  • Having benefit plans (medical and retirement) while complying with tax laws.

  • How to take the tax implications into account when making strategic business decisions.

  • What to do when you hear from the IRS.

  • How to determine whether you need a tax professional to assist you.

Who this book is for

Taxes for the Small Business Owner is designed for owners of small to medium-sized businesses and aspiring entrepreneurs—millions of people in the U.S. This practical guide on taxation is designed for those who want to lower their tax bills by maximizing deductions. It will appeal to any owner or manager who wants to pay less tax—legally.

Table of Contents

  1. Titlepage
  2. Dedication
  3. Contents
  4. About the Author
  5. Acknowledgments
  6. Introduction
  7. Part I: Before the Business Opens
    1. Chapter 1: The Business Entity
      1. The Sole Proprietor
      2. Partnerships
      3. Corporations
      4. Moving from One Entity Type to Another
      5. Which Entity Is Right for You?
    2. Chapter 2: An Overview of Taxation
      1. Types of Taxes
      2. What Is Income?
      3. What Are Expenses?
      4. Cash vs. Accrual Accounting
    3. Chapter 3: Before Your Business Opens
      1. The Start-Up Phase
      2. Start-Up Expenses
      3. Organizational Expenses
      4. Record Keeping Requirements
  8. Part II: Day-to-Day Expenses
    1. Chapter 4: The Basics of Expenses
      1. Overview of Expenses
      2. Documentation Requirements
      3. The Ordinary Standard
      4. The Necessary Standard
      5. For the Business
      6. Nondeductible Items
    2. Chapter 5: Cost of Goods Sold
      1. Can All Businesses Use Cost of Goods Sold?
      2. Inventory: The Basics
      3. How Inventory Is Expensed
      4. Inventory Valuation and the Physical Inventory
      5. Cash Basis Inventory
      6. Other Expenses Included in Cost of Goods Sold
    3. Chapter 6: The Office
      1. The Rented Office
      2. The Home Office
    4. Chapter 7: The Car
      1. Automobile Expenses: The Basics
      2. Recordkeeping Requirements
      3. The Standard Mileage Rate
      4. Actual Expenses
      5. Commuting Mileage
      6. Mixed Trips
      7. Ancillary Expenses
      8. Reporting Car Expenses
      9. Company Cars
      10. Other Kinds of Vehicles
    5. Chapter 8: Travel
      1. Business Travel
      2. Tax Home
      3. What Can Be Deducted
      4. What Can’t Be Deducted
      5. Reporting Travel Expenses
    6. Chapter 9: Meals and Entertainment
      1. Meal Expenses
      2. Entertainment Expenses
      3. Per Diem Expenses
      4. Special Situations
      5. Reporting Meals and Entertainment
    7. Chapter 10: Fixed Assets and Depreciation
      1. Basis
      2. Uniform Capitalization Rules
      3. What Assets Must Be Depreciated?
      4. Types of Depreciation
      5. Special Kinds of Depreciation
      6. Rules and Recordkeeping
      7. Leases
      8. Amortizable Assets
      9. A Typical Strategy Used by a Small Business
  9. Part III: Employees, Payroll Taxes, and Benefit Plans
    1. Chapter 11: Other Deductions
      1. Advertising
      2. Bad Debts
      3. Bank Fees
      4. Casualty Losses
      5. Charitable Contributions
      6. Commissions
      7. Computer Services and Supplies
      8. Continuing Education
      9. Contract Labor
      10. Dues and Subscriptions
      11. Education
      12. Gifts
      13. Insurance
      14. Interest
      15. Legal and Professional Fees
      16. Office Expense
      17. Rent and Equipment Rental
      18. Supplies
      19. Taxes and Licenses
      20. Uniforms
      21. Utilities
      22. Anything Else
    2. Chapter 12: Employees and Wages
      1. What Is an Employee?
      2. What Is an Independent Contractor?
      3. Independent Contractor or Employee?
      4. Statutory Nonemployees
      5. S Corporation Rules for Owners
      6. Employing Family Members
      7. Reporting Rules for Payroll
    3. Chapter 13: Payroll Taxes
      1. Before You Have Employees
      2. Taxes on Employees
      3. Trust Fund Taxes
      4. Taxes on Employees and Employers
      5. Taxes on Employers
      6. EFTPS
      7. Should You Use a Payroll Service?
      8. Reporting Payroll Taxes
    4. Chapter 14: Medical Expenses
      1. The Affordable Care Act
      2. Medical Expense Deduction
      3. Health Insurance for the Sole Proprietor or Partnership
      4. Health Insurance for the S Corporation
      5. Health Insurance for the C Corporation
      6. Employing Your Spouse
      7. Medical Benefit Plans
      8. Other Provisions of the ACA
    5. Chapter 15: Retirement Plans
      1. The Basics of Retirement Plans
      2. The Traditional IRA and the Roth IRA
      3. The SEP IRA
      4. Keogh Plans
      5. Solo 401(k) and Solo Roth 401(k) Plans
      6. 401(k) Plans
      7. SIMPLE IRAs
      8. Other Retirement Plans
  10. Part IV: Other Items
    1. Chapter 16: Other Taxes
      1. State Income Tax
      2. Local Income Taxes
      3. Excise Taxes
      4. Gross Receipts Taxes
      5. Sales and Use Taxes
      6. Real Property Taxes
      7. Personal Property Taxes
      8. Local Business Licenses
      9. User Fees
      10. Other Taxes
    2. Chapter 17: Dear Valued Taxpayer: When You Hear from the IRS
      1. What to Do When You Get an IRS Notice
      2. Types of Audits
      3. Field Examinations
      4. IRS Appeals
      5. Court
      6. Audit Reconsideration
      7. State Audits
    3. Chapter 18: Other Topics
      1. Tax Planning for 2012 Based on the ACA and Expiring Tax Legislation
      2. When a Business Loses Money
      3. Net Operating Losses
      4. Foreign Issues
      5. Paper or Electronic?
      6. Obtaining Tax Help
      7. Should You Use a Tax Professional?
      8. If You Use a Tax Professional
      9. Selling Your Business
      10. Conclusion
  11. Index