The best way to navigate business taxation, especially if you are getting ready to start a new business, is to retain a Florida business tax attorney. When determining which type of entity you want to use, you must look at the tax ramifications of each type. For example, a small business might benefit more from a pass-through entity, such as a single-member LLC or an S-corporation, while larger businesses may benefit more from a C-corporation, which has double taxation.
Here are some tips to navigate the complexities of business taxation that can help you reduce your tax burden or even reduce the risk of an audit.
Retain Business Law Attorneys
A Florida business law attorney, like the tax attorney at France Law, has experience in tax laws that affect businesses, including choosing the best entity type and helping you through your years in business. Tax attorneys can do your taxes like an accountant, but they also know the laws and must keep up with all of the new tax laws.
Always Keep Adequate Records
While it’s tempting to throw your receipts in a box and deal with them at the end of the year, doing that could increase the risk of an audit. If you lose a receipt or miscategorize it, it could impact your tax obligation. Keeping receipts in date order and separating them by category makes your federal taxes much easier – and you’re sure not to miss a significant deduction.
Part of keeping adequate records is separating business and personal expenses. If you commingle your expenses, the IRS can start looking through your personal accounts for business expenses.
Claim All Income
Make sure you claim all of the income you earn, even if someone doesn’t give you a 1099. If you don’t keep track of your earnings in an accounting program, keep a spreadsheet of everything you earn. Even though your clients do not send you a 1099, they are still reporting the income you earn to the Internal Revenue Service, as it is an expense for them.
Many clients no longer send 1099 forms if they pay you via PayPal or another online processor. Some processors send you a 1099 based on the amount you ran through the processor and / or the number of payments you received. When that happens, and a client pays you, you end up with two 1099 forms for the same income. Thus, some clients stopped sending 1099 forms.
Know What Gross Income and Net Income Is
Gross income is what you earn before any deductions, including the cost of goods sold. Gross profit is what you have when you subtract the total cost of goods sold.
Net income is gross income minus the cost of goods sold, operating expenses, interest on loans and debts, depreciation, income taxes, overhead, and other government deductions.
When selling goods, you must know what your realized profit is, or you could end up losing money. For example, if you sell Widget A for $100 and your cost of goods is $25, you might think your profit is $75. However, you must also subtract all the other expenses that go into making Widget A. If the listed expenses exceed $75, you will take a loss on that product.
If you do not do payroll yourself, be sure to find a reputable company to do it for you. You could find that the company deducts taxes but never sends your payroll taxes in – and then you’re on the hook for anything the payroll company didn’t pay. Always check your accounts.
Contact France Law
Business law attorneys and tax attorneys can reduce the stress of tax time by helping with your taxes and ensuring you set your company up in a way that best benefits you. Contact the tax attorneys at France Law for help with your yearly federal taxes and setting up a company that best benefits you and your business.