A Beginner’s Guide to Small Business Tax Deductions

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A Beginners Guide to Small Business Tax
Deductions
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Which Brings Us to Tax Deductions?
Tax deductibles help in reducing the tax burdens
of the small companies. It helps the companies in
the early stage of the running. Saving the money
can be a huge confidence boost for the new
companies. It is the reason behind considering
the tax strategy as a key for the companies.
Cash-based taxpayers have the flexibility to
determine the timing of the income and expense
for each of the calendar year. While accumulation
basis taxpayers can accelerate expense and defer
their income.
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What Small Business Expenses Are Deductible?
It is probably one of the most important things
that all the business owners want to know. Before
the small business will claim for a deduction for
a particular expense one must know that the tax
law says that only those expenses which are
necessary to run the business comes under the
list of deductions. Further, a small business
must keep the personal expenses and business
expenses separate to claim the deduction.
According to the IRS's website, there is 92tax
deduction that a small business can claim.
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What You Need in Order To Take Deductions?
1. A Bookkeeping System
Often small businesses used to avoid this but it
is really important, especially when it comes to
tracking the incomes and the expenses. To file
the tax return, you need to have a properly
updated balance sheet and the income statement.
These all you can get only by keeping a perfect
bookkeeping system. Balance sheet keeps the
record of buying, selling, or disposing of
capital assets that year.
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2. Receipts Records Documenting Expenses
Keeping the records is key to tax filing for any
business. No matter you store these records
digitally or you are using the still same old
methods, you should keep the records for sure. No
doubt, that your accountant and CPA will surely
thank you for such a great maintained record. In
the case of missing records, your claim for
deduction will not be viable. It is best to hire
tax services for these works.
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3. Certain Expenses Require Specific Records
Only keeping the receipts will not matter in all
the cases. In some special cases, you need
specific records to claim the deduction for your
business. Suppose you have used your car for a
business purpose. You need to keep entire details
of the user to claim the deduction. It will be
better to keep a separate log for the business
and personal use of the car.
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Tax Deductions vs. Tax Credits
Apart from the general deductions, there are some
set of activities that a business needs to
perform and these are qualified for the tax
credits that provide a dollar-for-dollar
reduction in tax liability. Tax deductions lower
your tax liability by reducing your taxable
incomes. There is the corresponding form that you
can use for the tax credits. Often the tax
credits give more benefit than a tax deduction.
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Thank You
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