Tax withholding is a fairly straightforward concept. However, when you dig into the details, it can get complicated.
At a basic definition, tax withholding refers to the amount of money that your employer withholds from your paycheck. They send that to the IRS. When you do your taxes in April, you may find that you still owe more money. On the other hand, you may find that they’ve been withholding too much, and that’s when you get a tax refund.
There is a difference between single vs. married withholding for taxes. It’s worth learning about.
As you finish the filing process, be sure to keep these write-offs for small businesses that are often missed in mind:
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.
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.
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.
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.
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.
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.
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.
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.