5 Tax Tips for Small Business Operators

5 Tax Tips for Small Business Operators
  • Opening Intro -

    It is here. Tax season, that is.

    As a small business operator, you may find that the tax year provides additional challenges as you seek to navigate through recent changes in federal tax policy.


Uncertainty is also playing in as tax rates rise and your profit line shrinks. Still, if you are a small business and keep your personal records separate, you can take advantage of deductions that can help your business not just survive, but thrive.

1. Business and personal account separation. Every business, no matter its size, should operate separately from your personal accounts. This means opening a business checking account and applying for lines of credit through your business. Your legally established business is eligible for a tax identification number from the IRS. Open up your accounts with this number instead of your personal Social Security Number.

2. Manage your records. It isn’t enough to establish separate accounts for your business. You need to track your spending and keep receipts as you go through the year. This means that when you buy office supplies for your business, that you mark on the receipt the purchase of that sale, especially if you paid cash. If some items were purchased for personal use, only deduct those items used for your business. If audited, the IRS will want to see that line of demarcation on your receipts.

3. Set aside your taxes. As a small business, you are required to pay taxes. Even if you do not have employees, the IRS will be looking for quarterly payments in January, April, June and September. Know the due dates for your taxes and set aside money as you go through the year. Your estimated taxes also cover your Social Security taxes — make certain that the amount you send in quarterly to the IRS is sufficient. Your state, too, may require payments.

4. Automotive use for business. If you use your personal car for business purposes, then you may have a sizable tax deduction awaiting you. The IRS allows you to claim expenses by deducting your actual expenses or by taking the standard mileage rate method. You will do the latter if you did not take keep records. No worries, for 2012 the deduction is 55.5 cents per mile driven.

5. When customers rip you off. Unpaid invoices and other bad debts are a pain. During this past tax year you may have lost hundreds perhaps thousands of dollars to customers that did not pay what they owed you. If you lost money for goods sold, you can deduct that loss on your taxes. If you lost money for services rendered, you cannot deduct that loss according to Nolo.

Business Notes

If you are not certain what deductions you are permitted to take, consult your business tax accountant for assistance. For freelancers, using a business tax software program such as TurboTax can help you out too, saving you consulting fees as you manage your business.

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Categories: Small Business

About Author

Matthew C. Keegan

Matt Keegan is a freelance writer and editor as well as publisher of "Matt's Musings", his personal blog. Matt covers campus, consumer, business and financial topics on various websites and blogs, and has been published in the "Houston Chronicle", "Sam's Club Magazine" and "Wisconsin Golfer".