Small business taxes: the most overlooked deductions
Small business owners face a tax challenge this year. Form 1099-K is an attempt to help close the tax gap — the $385 billion difference between what the IRS thinks it should be collecting and what it actually collects — by making sales and other commercial transactions on the Internet harder to hide.
The forms are being sent to business owners by credit card companies and online payment processors including eBay, PayPal and Amazon. The 1099-Ks list all 2011 transactions processed for sellers with more than 200 transactions and $20,000 in annual gross receipts, according to this helpful Q&A on Bloomberg BusinessWeek’s small business site.
The IRS estimates that 53 million forms will be issued this year, and that the move will add $9.5 billion to its coffers over the next decade.
Small business groups have been protesting the new rules, arguing that they add to their already sizable burden. (Small business owners spend more than $1,000 per employee in tax preparation costs and time.)
The people at Outright, a company that advises small business owners on organizing their finances, put together a detailed info graphic on the 1099 -K, including this explanation of the form itself.
The specter of higher taxes makes it all the more important to small business owners that they deduct everything to which they’re legitimately entitled.
Ten frequently overlooked deductions were written up by businesswoman Deborah Sweeney last year for the Huffington Post, in this detailed piece . Among them:
1. The Healthcare Tax Credit
Businesses with 10 or fewer employees that average less than $25,000 annually and pay at least half of their employees’ medical insurance are eligible for a credit up to 35%.
2. Depreciation on your business vehicle
Gas and maintenance of your vehicle is also 100% deductible if it is used exclusively for business purposes.
3. Out of town business travel costs
Meals, transportation, hotel all deductible, but keep those receipts.
4. Home office
Nearly 100% of business owners can take deductions on items for a home office space, including a percentage of Internet and telephone bills.
5. Professional fees and classes
Membership fees, classes, training all are deductible if they continue your career.
Please add your thoughts in the comment section below. Are you using the 1099-K? Has it made a difference in your tax season?