Important Tax Details Entrepreneurs Should Always Keep In Mind
Tax, tax, tax— everybody’s got to pay. A lot of us don’t want to, given that we are usually unsatisfied with the end product of said taxes.
18:55 08 October 2020
But hey, if you don’t pay them, you’ll most likely suffer serious consequences. Because taxes are such a deeply ingrained part of the modern economic process, we as entrepreneurs have to keep our heads in the game and keep complete track of it all. Sure, not all of us want to do it. We hire people to look out for that. But there are good reasons to keep tax codes in mind. There are even better reasons to have a firm grasp on all your options regarding said codes. There are some that, if used properly, can be of great benefit to you and your business. Here are some of the important details that you, an entrepreneur, should keep in mind whenever you’re moving money around.
Deductions are the bread and butter of the small business owner. They’re the absolute greatest way to keep taxes low and present an in-line means of potentially cutting overhead. Everything that you use in your business can be a potential write-off. Now, not everything is a write-off. Federal Tax Agencies are quite keen on finding people who try to use that stipulation as a means to have no cost. Those moves are for the giant tech companies. But as a budding entrepreneur? All you need is a good home office deduction guide and some time to get better at the process. Once you do, you’ll be able to see patterns in spending and determine whether or not they are qualified to be written-off. You’ll be surprised at what counts towards a business process. Don’t miss out.
Employee or Subcontractor?
One thing that people overlook is the people they hire. We have this assumption that our next big idea is the main focus, and we gather people to support this idea. That’s all good in the boardroom. But on the ledgers, one has to distinguish between who is an employee and who is a subcontractor. You mix those two up and you’ll be in big trouble. Take a look at California. The State of California recently concluded that Uber drivers were to be considered as employees and not independent contractors, even if their business model is clear about what the drivers’ roles are. Because of this, Uber has had to fight tooth and nail, lobbying a spot on the stare ballot determining if this is true. If not, they leave the state. That’s how deep the distinction between employee and subcontractor goes. You have to pay out benefits, Medicare, health, etc. to employees.
Outside of a home office, there are plenty of tax breaks or startups. Again, federal tax agencies are not going to be outright about this. They’re not in the business of losing money. For instance, you can deduct up to $5,000 in startup and research costs. That covers whether or not a business is viable, and even the supplies needed to get things off of the ground. This is a great relief for young startups who tend to only think about elevator pitches and Kickstarter campaigns. There are other ways to get your money back on research and startup costs.
Payroll is another aspect of business that we tend to overlook until the last minute. Again, it’s one of the most important things you need to get straight. There are scheduled payments when you have employees. These can either be weekly, monthly, or quarterly in the form of an employee-filled W-4 federal withholding. You also have to match social security and Medicare. It’s the bane of many entrepreneurs, but it is what it is. That's all your responsibility if you're independent with employees. Now, there are guides on how to do this, sure. But tailoring the process to your needs, as long as everything is in line, is the best way to go about it. Even if you have an accountant, you need to be fully aware and in complete control of this process. Or else, too many things will fall through the cracks.
Taxes might not be the most fun topic to tackle as an entrepreneur. Most of us tend to avoid it altogether. It lacks that luster of the chase. It’s devoid of the handshakes and moves we want to make. But it is necessary. It’s the process behind the curtain keeping things afloat. If you can master it and make sure everything is on track, you’ll be on your way to worry-free, clean profits quarter after quarter.