I am writing “52 Cups of Espresso” weekly update on a Startup Journey for a #workleisure lifestyle brand. Documentation of lessons learned and advice along the way. See where the journey began here. Read on and join the conversation.
As an extension of last week’s discussion around year end tax planning, this week continues the discussion on smart moves for the upcoming year — Going from cash burn to selling products.
As a new business owner, your to-do list is a hefty one. While you’re juggling startup tasks, you’ll also want to think about how taxes will impact your business. Here are five tips that could help get your business finances in line with the best possible tax benefits.
This may seem obvious, but it is often an overlooked point. Handling your personal and company expenses in different accounts makes it easier to keep records and prepare tax filings for the following year, and, if you happen to be audited, you won’t have to sift through your personal transactions. If you lose your receipt for a business expense, at minimum you will have your business bank statement as support! If it’s co-mingled with your personal account, you will have a hard time explaining personal vs. business expenditure to your auditors.
I know expenses are hard to keep track of (Ugh.. I can relate!), but recording expenses as they happen can save time as well as reduce the chances of accounting errors, while maximizing your tax return.
Smart App recommendation for tracking: Wave (Free!)
There are two ways to calculate the deduction. The simplified method is relatively straightforward; take $5 times the square footage of your home office (up to 300 square feet, or max $1,500 deduction). Alternatively, there’s the regular method, which takes into account not only square footage, but also utilities, mortgage interest or rent, and property taxes. While the regular method requires more work, there is also cap on deduction.
Deducting vehicle expenses based on actual costs (i.e. gas or maintenance costs) or the IRS mileage allowance (53.5 cents per mile in 2017).
Smart App recommendation for tracking: MileIQ
As a startup you may not be able to afford full time employees in the beginning, plus it requires a lot more admin work in terms of payroll taxes and benefit management throughout the year. If you are paying a contractor greater than $600 (IRS Code 6041), be sure to have all contractors complete a W9 tax form. This will ensure that you have all the necessary information to provide them with a 1099 tax form at the end of the year. Please note, 1099s are due to the contractor as of January 31st following each calendar year.
That’s all folks!
Ron Swanson from Parks and Recreation gives us a good summary of taxes by eating a nine year old girl’s lunch.
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Let’s continue this conversation.
If you enjoy reading about the #52WeekStartup journey, please “Like” and “Share” this week’s article. Any questions or topics you’d like for me discuss further, please leave in the comments below.
Lisa Hu / Share this using #52weekstartup
