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Tax Advice for the Sole-Proprietor

 

If you are the sole proprietor of a business, accurate tax advice may help you save a lot of money in taxes. As a sole proprietorship, you can expect to fill out various tax forms such as the 1099 form. If you know what you're doing when filling out these forms, you can apply for hundreds or even thousands of dollars in tax deductibles depending on your business. The following tax advice may help you recover as much tax money back as possible.

Expense Records

When operating an at home business, it's very important to keep careful, thorough track of even the smallest expenses if they are related to your business. If you drive your car for a business purpose, track your mileage, parking fees and toll fees. If you use your telephone for a business purpose, record the number of minutes spent. Keep a notebook where you write down the purpose of your expense along with mileage, fees, minutes or any other applicable information. If you purchase something for your business, keep the receipt. Even if you're doubtful whether or not an expense will qualify for a tax deduction, write it down just in case. Being as thorough as possible with business expenses can save you money and make your forms less of a hassle to complete.

Equipment and Supplies

Many people make the mistake of lumping business supplies and business equipment into one group when applying for deductions. Equipment, such as a computer or a printer, must be categorized as equipment; supplies, such as paper clips, must be categorized as supplies. Making the mistake of listing equipment as a supply, or vice versa, may cause you to be ineligible for any deductions at all due to "improper characterization." Keep these 2 expenses separate when listing them for deductions.

Expensive Gifts

Another common mistake is not realizing when you give gifts to clients or business associates, there is a limit on the gift tax deductions available. Individuals may only receive gifts of 25 dollars per year from your business that is tax deductible. Above that $25, the cost is completely on you and your business. This doesn't mean that you should skimp on gifts, but you should be aware of the tax deductible limit per person when deciding how generous to be.

Available Resources

Take advantage of all the free online resources available to you if you have any questions about filling out your tax forms. The IRS website, perhaps surprisingly, answers many questions that could end up saving you tax money. There are also many other reputable sites and forums online, which may help you answer specific questions.

The advice presented in this guide covers two frequent errors--combining equipment expenses with supply expenses and expecting large gifts to be 100 percent deductible. It may also help you save money by keeping accurate and precise records. Any further questions can be answered by using additional free resources.

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