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TAX TIPS FOR SMALL BUSINESSES

Feb/18/2024 / by Brian Sodoma

Ideas to make filing easier this season and the next

Metal analog table alarm clock with a sticky note with the words tax time
Photo via Shutterstock

If you’re a small business owner, you probably wear a few hats – CEO, CFO, head of marketing and sales, and so on. With so much to do, tax season can sometimes feel, well, taxing. Figuring out how to get organized and what questions to ask a tax professional can be daunting. That’s why we tapped a tax professional, Andrew Leavitt, to offer a few tips. Leavitt sits on the Nevada Financial Literacy Advisory Council, and is a credentialed IRS tax preparer. He offers five tips for 2024 tax season exclusively for SEEMA readers.

Make Most Of Your Vehicle Mileage

If you use your car for business, the mileage reimbursement is a simpler way to write off business vehicle expenses than tracking repairs. Also, the IRS prefers you use it, Leavitt says. This year’s IRS reimbursement rate is 65.5 cents per mile. If you use your vehicle a lot for business, those miles can add up to a substantial expense deduction.

You’ll want to make sure miles are documented in a spreadsheet. Indicate where you went and for what purpose, the distance, even specific odometer miles, in case you are ever audited. If you haven’t stayed on top of your mileage this year, let the experience be a teacher. Create that spreadsheet for 2024 now and you’ll be ready to take advantage of this deduction next year.

Ask About COVID-19 Tax Credits

COVID-19 now seems like a distant memory, but valuable tax credits from legislation passed during the pandemic may still be available to you. For business owners, self-employment tax credits for days you were out sick during the pandemic are still available, up to $561 per day, up to a maximum of $32,000 for the year, Leavitt says.

The COVID employee retention credit (ERT) can give employers a credit of up to $26,000 per employee as well. The credit can free up funds for you to spend directly on your business, Leavitt explains. The downside is that it might take a year or more to receive the funds, but it’s worth asking a tax professional about the program.

“I’m surprised by how many businesses still have not taken advantage of some of these programs. They are worth investigating,” he says.

Hold On To Receipts

When it comes to tracking expenses, Leavitt says there is one common myth many small business owners embrace. For anything that’s purchased for the business, they believe a bank statement of the transaction is sufficient for tax purposes. But a bank statement is not enough—you need the actual receipt.

“There is nothing more positively false than this thinking about business expenses,” Leavitt adds. “Fortunately, only one percent of people are audited, but you don’t want to be that one percent.” You’ll also need to make sure you use your business account to pay for the expense, not a personal credit card. Leavitt suggests business owners write what the purchase is for on the back of the receipt. If it’s lunch with a client, for example, write the client’s name on the back and what was discussed.

Ask About Depreciating Fixed Assets

Laws have been updated around depreciating your business’s fixed assets such as computers, vehicles, or even real estate you may have purchased in 2023. Many small business owners can now write off a percentage of the purchase price each year for the next several years, Leavitt explains. It’s a helpful deduction that’s often overlooked, he adds.

Taxes In The Near Future

The IRS had plans to start making third-party payment apps, such as Paypal or Venmo, to report anything over $600 in transactions for the account holder as income. The implementation has been stalled, but it’s something small business owners should keep tabs on, as it could affect their tax bills in coming years.

Leavitt also offers one final reminder. If your company is an LLC, it’s important to register it with the Financial Crimes Enforcement Network (FinCEN) by the end of 2024. In the past, LLCs only required registration with their respective states. Now, they must be registered with the federal government. Otherwise, you could face fines and other penalties next year.

“I honestly think about 98% of LLCs haven’t done this,” Leavitt adds.

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