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Tax Tips for Those Who Started a Business in 2014 | Business

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Tax Tips for Those Who Started a Business in 2014
Business
Tax Tips for Those Who Started a Business in 2014

According to the Small Business Administration, there are around half a million new businesses opening their doors each year. Many of the new businesses started in 2014 are considered small, joining the ranks of the nearly 28 million small businesses around the nation. With tax season upon us, it’s important that these new entrepreneurs know what to look for when preparing their taxes, which can make a big difference in how much they own come tax day.

“A new entrepreneur has a lot on their plate and they are busy with many things, but you don’t want to overlook tax issues,” explains John Gregory EA, tax practitioner and founder of 1040Return.com, a site providing tax preparation and resources. “It’s important for these new small business owners to take the time to consider all the tax deductions they can take so they lower their liability.”

There are things that will affect your taxes if you started a business in 2014. Here are some tips for those entrepreneurs to keep in mind:

·      Those who are self employed will have to pay into Social Security and Medicare. This means that approximately 15 percent of their earnings will go toward that contribution.

·      The new business start-up costs can be deducted. There are two components of the method of availing deduction for start-up costs of your business. The IRS allows you to deduct a portion of the start-up cost in the first year of commencement of business. The remaining portion is amortized over the next 15 years / 180 months of business, beginning from the month in which your business becomes operational. You can claim the deduction of up to $5,000 in the first year itself. However, the start-up cost of your business should not exceed $50,000.

·      Consider those doing work on your behalf, such as employees or contract labor. With contract labor, you do not have to pay into Social Security, Medicare, Unemployment and Workers Compensation. For this reason, it is usually to the advantage of the owner to have contract labor. The best rule of thumb in determining if you have contract labor or an employee is how much control you have over the work of the individual. The more control you have over the individual work, the more likely they will be classified as employees.

·      If you started a business in 2014 it is a good idea to incorporate. By incorporating you can protect your personal assets.

·      If you set up your business as a S Corporation you can avoid paying some of your profit into Social Security and Medicare. Your income that you receive from your corporation flows into your personal tax return and not subject to Social Security and Medicare tax. However, the IRS does expect you to take W-2 wages for the work that you perform for the corporation.

“Keeping some of these tips in mind can save new entrepreneurs a lot of money,” adds Gregory. “The first year in business is often the most challenging year for people. The more you can do to lesson the tax burden situation, the better off you will be.”

1040Return.com provides tax software resources, information, tools, and more. It has been designed to help the self-employed and small business owner. They have also conducted research to calculate the average net profit for all 318 industries, based off of average gross sales. This free information helps small business owners maintain accurate records and provides an idea of IRS expectations. They also provide audit protection insurance that helps if there is ever an audit. For more information on 1040Return.com visit the site at: www.1040Return.com.

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