How to Bounce Back from Taxes as a Business Owner

how to bounce back from taxes as a business owner

Running your own business is no easy task, but it can be especially difficult during tax season. From the moment you meet with your accountant to writing that big check to the Internal Revenue Service (IRS), your shoulders tend to be clenched tighter than a boxer in the middle of a fight. But, the good news is that once you pull off that band-aid, there are ways you can easily recover. The following are just a few ways to bounce back from taxes as a business owner:



How to Bounce Back from Taxes as a Business Owner

Create a Passive Income Stream

Relying on one source of income can be straining, even in the business world. When you only have one revenue stream, your business is reliant on customers buying products or services, both of which can fluctuate in different seasons. By creating a passive income for your business, you’ll stress less about sales and be able to put more into the business. Business blogging, YouTube videos, an app for your business are all great examples of a passive income that you could start utilizing this year.

Re-evaluate Your Expenses

Now is as good a time as any to really dive into your expenses. As a fellow business owner, I completely understand how daunting this is; however, it’s important to regularly check on what you’re spending money on in the business and how necessary those expenses may be. For instance, in my own business, we noticed we had a couple subscriptions that really did not give us much more value than their free versions, nor do we use them all that often. We decided to cancel these and use this money elsewhere like more advertising and growing our savings account (more the come on that later).

Reach Out to Leads

Although it may seem counterintuitive to invest in advertising right now, this is actually a prime time to do so, particularly if you are a business-to-consumer (B2C) establishment. Consumers will receive their income checks soon (if they have not already) and may feel ready to spend. For those who are business-to-business (B2B), your potential clientele may also be ready to buy now that the stress of tax season is primarily out of the way. They, too, will be looking for ways to bounce back from taxes, and you may just be the key.

If you do have a smaller advertising budget, you can still reach leads through networking. This is one of the best ways to get attention to your company. With options available both online and offline, you should be able to sign up new business in no time. (As long as you are being consistent, that is.)

Start a Savings & File Quarterly

If you dread taxes every year (and who doesn’t?), look into filing quarterly, if you do not already. This is highly recommended and suggested by many to avoid paying such a large lump sum at once. My business partner and I decided from the day we opened our virtual doors for business that we were going to keep a percentage of our revenue in savings specifically for taxes so that we were not worrying about where to come up with the money. Keep a minimum of 30% of your net profit in a separate account at all times so that you have a better idea of where you stand. This will reduce the stress of taxes and keep your head in the game so that you can do what you do best — run your business.

What tips would you add on how to bounce back from taxes as a business owner

Write-Offs For Small Businesses That Are Often Missed

Write-offs for your small business

Write-offs for your small business

Write-offs are often hiding right under our noses.

If you’re a small business owner that has yet to file your 2015 taxes, you’re probably jumping for joy over the news that taxes are now due April 18 instead of April 15. And, if you do have yet to file, this also buys you a little more time to review and evaluate your expenses and potential deductions with your accountant.

As you finish the filing process, be sure to keep these write-offs for small businesses that are often missed in mind:

  1. Your startup costs. As surprising as it may be, if you are in your first year of business, costs accrued to start up your business count as capital expenses and can be deducted up to $5,000. If fees go beyond this limit, you can opt to write-off certain initial investments over a period of 15 years. Also, if your attempt to start your business is sadly unsuccessful, you can still deduct the costs as a capital loss.
  2. Health insurance premiums. While this expense would not be considered a business write-off, you can deduct this as a personal expense on a 1040 form if you are self-employed. Deductible premiums includes ones paid for yourself and your immediate family.
  3. Home office. You may already be aware of this one, but small businesses tend to forget about this or often surprisingly steer clear of trying to include this in their write-offs due to worry of an audit to the business owner. If the space is used strictly for business, though, and nothing else, such as entertainment for guests or other family members, this is a business deduction from your taxes. Your home office doesn’t need its own room to count; it can still be a part of another room in the home. To determine the amount that is deductible in a shared space, you would measure the work space and divide by the square footage of the room. Read more about the home business tax filing and deduction process here.
  4. Bank fees. Charges from your bank for ATM withdrawals, account fees and the like are completely deductible. Make sure to keep this in mind when filing and reporting your expenses throughout the year.
  5. Office supplies. Keep a steady record of the receipts and purchases of your office supplies used for your small business. These will help to provide a tax break for you.
  6. Furniture and other equipment. Office furniture or furniture and equipment used for your company can be deducted in full the same year of purchase or depreciate, which is taking a portion over a period of time. For furniture, you would deduct through the course of seven years. For other equipment, such as computers and printers, you would depreciate for five years.
  7. Driving your car. If your vehicle is a staple for your organization, the IRS permits you to write-off some of the costs. Even if you only periodically use your car for meeting with clients or other business-related exchanges in between your personal errands, you can still receive a tax break for related costs. Just be sure to maintain strong documentation on mileage, gas, parking and toll fees and even the justification for drive. We recommend immediately writing this information down per trip with the date included to avoid having to go back and remember these tedious details.
  8. Credit card interest. If you were paying for business items with your credit card, you can deduct the interest paid on the card on your taxes.

Some other expenses that can be write-offs for your small business include but are not limited to: education costs, subscriptions to industry publications or memberships related to increasing knowledge in your trade, travel charges, and even some entertainment expenses. You can read more about those tax breaks in this helpful guide.

Make sure to always inquire about what can be included as a deduction for your small business so that you can use more funds to do those bigger things we know you are all meant to do.

Are you really aware of an asset meaning?

Whether you are a numbers person or not, finances become a major part of your life as you continue to propel into adulthood. As you are consistently reminded of the importance of investments, it is also imperative to understand the difference between an asset and a liability, especially if you are making purchases with the intent to create value.

So, what is the definition and meaning of an asset?

According to Dictionary.com, an asset is “a single item of ownership having exchange value.” Google.com also defines it as “property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies.”

Of course, other definitions include a balance sheet for liabilities and capital as well as generalized to anything that is useful or valuable.

Robert Kiyosaki, American businessman, investor and self-help author, puts the description of the meaning of an asset a little more simply:

Asset Meaning

His examples include real estate, businesses that don’t require you to work at them, and stocks and bonds as mentioned in his book, “Rich Dad, Poor Dad.”

However, certain items you own can also be considered an asset, even within your own home.

Conversely, these same articles could be liabilities. Liabilities, as defined by Dictionary.com are “moneys owed; debts or pecuniary obligations.” Kiyosaki explains them as any purchase that takes money out of your pocket.

As you dive into the world of researching which of your household items put money in your pocket and which are a straight cost, you’ll need to keep these definitions in mind. A major issue is that many people believe their goods are profitable when, in reality, they are not as valuable as they think or, worse, they are a bit of a disadvantage to the consumer’s pocket.

While this can be an often confusing topic, Suburban Finance is here to help clear things up. Below are common possessions that you may not have realized were assets (or liabilities):

  • Your carSome will actually deem your vehicle a more of a liability due to the amount of expenses that go into them over time. These include gas, maintenance, insurance and a loan. A car can surely be an asset, though, if the value is greater than the amount due on it. It is also classified in such terms as it can be sold for cash; however, it continuously devalues over time, not excluding the minute you drive it off the lot. While you can add your automobile to your overall net worth, you have to also deduct the liabilities on it when doing so along with determining the depreciating value. (Equally, include all liabilities in your total net worth calculation.) Many dispute on this topic, but you need to be able to establish the worth of the vehicle (trade-in value, what you gain over time, etc.) and the expenses you will accrue.
  • Fine art. Art and other collectibles, such as antiques, can add a considerable amount to your net worth. Of course, this type of purchase does not come without research. The rarer a piece, the more valuable; but the art industry is also very erratic. This is not an easy money-maker, even though its value can be limitless. This can be also be an initial expensive investment on top of an ongoing venture, since purchasing the original will be worth more than a reproduction. If you already have some items that you believe to have value, whether a reproduction or not, you should invest to have them appraised. This will be the best way to ensure you have a strong asset in your hands. Furthermore, you should be aware of the fact that home owner’s insurance may not cover your collectibles without special coverage.
  • Furnishings and appliances. Furniture, appliances and even clothes are considered what is known as non-earning or non-financial assets. These are items you own but do not provide extra revenue. One could say that appliances could also be considered an earning asset due to their efficiency in saving you time, which creates more opportunities for you to make money. If you are purchasing certain goods with the intention of investing, such as antique furniture or collectible items, you will (as mentioned above) want to consider getting them evaluated for value. While most household goods won’t necessarily produce more income, they do still represent part of your net worth. They are also useful for cases of bankruptcy and replacement cost in your insurance policy.
  • Guns. Firearm purchases have been on the rise, particularly with the gun-control laws. These purchases include both collectibles and commercial. Many investors are anticipating tighter regulations in the near future while others are concerned of the return of the federal assault weapons ban, which means any firearms in the banned categories will be illegal to produce. Those in circulation will, though, still be able to purchased and exchange hands with a fixed supply level. These commodities are very valuable to each owner, and they tend to appreciate over time. Guns are an investment that has a price dependent upon supply and demand. While still a strong subject, guns are, indeed, considered an asset due to their steady worth. As with any asset, they would also need to be disclosed if ever filing bankruptcy.
  • Your homeWhile common thought is that your home would be measured as an asset, Kiyosaki actually considers this to be more a liability due to the time and expenses spent on maintenance, mortgage payments, insurance, the home’s devaluation and the like. It’s likely that you may not sell the home for what it is worth due to still owning on the loan when you move. Renting a room, though, can help to turn this non-earning asset into a financial gain. Also, purchasing homes with the intent to rent to others would also turn home-buying into an asset. This is, of course, depending on who you ask. In the business world, homes are typically considered more of a liability due to costs in time and money. In spite of this, most homeowners will think of their house as a strong resource due to owning the property.

In summary, what is considered an asset and liability is often debated and dependent upon whom you ask. Just remember to keep in mind financial trends and potential value in items before attempting to turn household products into money in your pocket.