Small business owners are usually always on the lookout to save money wherever they can. Some owners will decide to fill out and file their own business tax forms without the help of a professional business tax preparation service. If you are a small business owner and decide to do your own taxes, there are 3 common deductions you should know about that could lower your personal and business tax bill. Here are 3 tax deductions small business owners regularly overlook that you should be aware of if you want to lower your tax bill.
You might already be aware that as the owner of a small business you have to pay the full assessment on your social security and Medicare tax bill as a self-employed individual. The normal tax rate is 15.3% of your total earnings up to $118,000 for the 2015 tax year. However, many self-employed small business owners neglect to take the employer (which is you) deduction on their personal taxes.
You can deduct half of what you pay on your personal taxes. This won't lower your social security and Medicare tax, but it will lower the adjusted earned income amount on your personal taxes. A lower adjusted earnings amount means you'll end up paying less for your personal taxes.
You can also deduct the banking charges for your checking account, ATM withdrawals, and loan fees. These are considered as a part of the cost of doing business and you can deduct them to lower your overall tax liability. You should make sure you keep all of your bank statements showing the fees you've been assessed during the course of the year in case the IRS asks you to verify the amounts you are deducting.
Bad Debts to Employees
You may also realize that you can write-off the amount customers and suppliers may owe you if you lent them money or credit and they didn't pay it back, but you can also write off a bad debt you gave an employee through the business. This situation typically arises when you advance an employee a sum of money in anticipation of receiving services from the employee. If the employee fails to provide the service and/or fails to pay back the advance, you can deduct it as income paid to the employee.
There seems to be countless intricacies in the tax law that you can use to lower your tax bill – provided you know what they are and how to claim them. If you want to learn more about the tax laws and how they affect you, you should contact your local business tax preparation service (such as Wiggins, Smit, Burby, Reineke, & Company P.A.) to learn more.