Business has become very competitive and the small businesses particularly have to make every attempt to save on cost and taxes, so that they can make a reasonable profit. To promote small businesses the Internal Revenue Service offers various tax deductions to them. These tax tips for small business are very important as it can save a lot of money for the businessman.
If you have just started your small business then in the first year you are eligible to deduct a start-up of $5000 and another $5000 as organisational costs. If you have not deducted these expenses you can liquidate them gradually over a period of 12 years, from the start of your business. Expenses like training of employees, market research, legal advise costs and travel for business can all be written off over the period.
IRS also provides tax deductions on money spent for educational expenses of the employees. The education should be directly related to the business and should improve the skill of the employee related to his job. Self-employed people also can write off educational expenses, provided the training is not for something totally new. Related costs like transport are also deductible.
Auto deductions is one of the most useful tax tips for small business, although it is closely scrutinized by the IRS. You must be very clear about the rules governing vehicle deduction, and also maintain meticulous records. There are deductions based on mileage or the actual cost of fuel and other types of vehicle maintenance. The cost of a new vehicle can be written off in a single shot or can be depreciated over several years. The IRS is very strict about personal vehicle usage being written off as a business expense. There are strict guidelines given in IRS publication 463 and these are to be adhered to.
The IRS provides deductions on equipments purchased by small businesses, according to the tax code falling under Section 179. For the current year there is a single deduction allowed for up to $112,000. The term equipment can include machines, cars, computers, furniture, machines and also many other devices which is used in the business. If you want the total deduction at one go, you will have to fill out the 4562 form. You can also depreciate the equipments over several years.
Half of the entertainment expenses can also be deducted, provided it is specifically spent for a conference or a meeting, or for entertainment immediately after the meeting.