WE"RE SPECIALISTS IN HELPING SMALL BUSINESSES

Small Business Tax Deductions

There are several tax deductions available to small business owners. The obvious ones like printer paper and business cards are easy. But what about cell phones? What is the business use of a shared family plan? How about home offices? Meals and Entertainment- is it 50% or 100%? When can a meal be 100% deducted? Here's the answer: a pizza party for the office is 100% deductible, but if the office is just you, then it's a no. However, if the office is you and your spouse, then yes. The rules can be tricky.  

Self-employed health insurance and health savings accounts (HSAs) can be tricky as well, and many small business owners leave money on the table by deducting these on Schedule A versus Form 1040. This little “gotcha” could cost you several hundred dollars in taxes. Have you considered a Health Reimbursement Arrangement (HRA) or a Flexible Spending Account (FSA) for deducting dependent care benefits? Being a business owner has long hours and sometime little pay- let us help you squeeze as much out of it as possible.  

At Mildrid Esua, CPA, these are the type of things will reivew with you. Oftentimes the taxpayer or small business owner gets in trouble because he or she did not understand the rules. Once you know the rules and how to apply the rules, owners can take advantage of small business tax deductions without worry or concern.  

Self Employed 401k Plan

Once you launch your shiny new small business, you might also consider the several small business retirement plans which include solo 401k plans, profit sharing plans, cash balance and defined benefits pensions. For example, with a solo 401k plan or self employed 401k plan piggybacked with a defined benefits pension, you could save over $192,000 at age 50. All tax deferred if you like, which could yield a savings of over $86,000 (assuming a 45% marginal tax rate with federal and state).  

Can’t contribute to a Roth IRA because you make too much? Perhaps a solo 401k plan with Roth option is your best bet with high contribution limits and no income phaseouts. Fidelity, TD Ameritrade, Schwab, etc. offer solo 401k plans, but they do not have a Roth option in the plan provision. Let us help you make the best choice.  

Our S Corp Package

If you make over $30,000 net income after all business expenses, you might consider an S corporation election and save 8-10% in taxes.

At Mildrid Esua, CPA, we specializes in S corporations which have a small number of shareholders, and often just a one-person enterprise. Because it is a core competency for us, we have created an S corp package that includes the following:

  • S Corporation Tax Prep (Form 1120S)
  • Individual Tax Prep (Form 1040)
  • S Corp Payroll Events (required by IRS), Filings and Deposits
  • Estimated Tax Payments (done thru payroll)
  • Q3 Tax Modeling and Projection
  • Unlimited Consultation and Periodic Business Reviews
  • Small Business Tax Deductions Business Tax Deductions Optimization
  • Annual Processing (W2s and other filings)
  • IRS Audit Defense

Our annual fee for the S Corp package is $2,640 (or about $220 per month). Do you want to parse it out? Sure. If you did your own payroll processing, our fee reduces to $2,160. Perhaps saving $480 to add chores to your Sunday is a consideration (yup, that’s a bit sarcastic). If you do your own individual tax return, our fee reduces to $2,240. However, the benefit of our office preparing both tax returns is that we slide things around depending on income limitations, phaseouts, alternative minimum tax (AMT), etc.

Contact us to schedule a consultation. Based on our discussion, we can prepare a proposal which outlines the scope of services.  

Recordkeeping

Keeping accurate records is actually pretty easy, especially if you have a dedicated checking account for the business. Two elements are required to meet IRS standards- a written log or record of the business purpose, and evidence of the amount paid, date and to whom. Bank account or credit card statements in conjunction with financial or accounting software such as Money, Quicken or QuickBooks will cover most of your business expenditures. A trip to WalMart or Home Depot would probably require a detailed receipt since you can buy paper and diapers at a WalMart.  

Money Handling

The biggest and most repeated mistake that small business owners commit is to spend company funds on personal items. Do not pay the house mortgage with your business checkbook! Write a check to yourself (or make a transfer), and then write the mortgage check. Items such as gas for your car seem business related- unless the vehicle is 100% business use and owned (and titled) in the business name, then it becomes a mixed use vehicle, and the gas purchase should be handled the same way as the mortgage check. Then, you turn in expense reimbursements to your company for the expense. This is called an Accountable Plan- contact us for more details.  

Hobby Versus Business

Is your business really a hobby? There several step by step criteria that the IRS and Tax Courts will use to determine if you have a genuine profit motive, or if you are just playing around with your business. There is no hard and fast rule such as the ubiquitous three years of consecutive losses rule. Recently the Tax Court upheld a track coach’s eight years of consecutive losses as a legitimate business.

Other things to consider are expense reimbursements, liability issues, retirement plans including annuities, life insurance, key person insurance, defined benefits plans, death clauses, divorce clauses, long-term care, health insurance, etc.

We're Here to Help

We are your Greensboro Accounting firm and look forward to working with you. And even if you don’t live in Greensboro, we can still provide excellent service through modern technology and our client portal. Contact us today to discuss your individual needs.

LEARN MORE

Contact Mildrid Esua, CPA for a confidential appointment and learn how to reduce what you pay in taxes each year.