Passageway Financial - Accounting, Tax, & Consulting’s Post

New year, new deductions!👏 Stay ahead of the game and claim your business deductions to keep more of your money. Read our most recent article to learn how.👇

Your roadmap to profitability starts here! Break-even analysis can turn your trade business from surviving to thriving. Learn to manage costs, set the right prices, and make smart decisions. #TradeBusiness #BreakEvenAnalysis #SmallBusinessGrowth #businessadvice #smallbusiness #accounting #tax #smebusiness #taxplanning #taxtips #sussexbusiness #P7trustedadvisor #watsonassociates #kentbusiness

Intro to Business Deductions Common business expenses, yes, but what else is and is not deductible? Are there rules for deducting business expenses? Click through to generally learn how to deduct the costs of running a trade or business from your taxes and what isn't deductible, like capital expenditures.

Some useful basic information from the IRS regarding starting a business

Did you know? Most business deductions aren't listed in the Internal Revenue Code. Section 162 allows deductions for "ordinary and necessary" expenses incurred in your trade or business. Find out which of your business's expenses qualify.

Starting a business? 🤔 Here’s how choosing the right legal entity impacts your business from legal and tax perspectives: 1️⃣ Sole Proprietorship: Simple to set up, but you’re personally liable for debts and lawsuits. Income is taxed as personal income. 2️⃣ Partnership: Ideal for two or more owners. Profits passes through to partners’ personal tax returns, but liability is shared in proportion to the partner's share. 3️⃣ Limited Liability Company (LLC): Combines the liability protection of a corporation with the tax flexibility of a partnership. Income can be taxed as a sole proprietorship, partnership, or corporation. 4️⃣ S Corporation (S Corp): Although not a legal entity, this is a tax election that can provide tax benefits to a business. Pass-through taxation avoids double taxation, and owners can take a salary plus distributions. However, there are strict eligibility requirements. 5️⃣ Corporation: Offers the strongest liability protection and easier access to investors, but profits are subject to double taxation (profit taxed at the corporate entity level, and then taxed again upon the distributions to the shareholders of the corporation). Key Considerations: Liability Protection: How much personal risk are you willing to take? Tax Efficiency: Some entities allow you to minimize taxes through pass-through taxation or deductible business expenses. Growth Plans: Are you seeking investors or planning to go public? Ongoing Compliance: Corporations require more paperwork and formalities than LLCs or partnerships. 💼 Choosing the right entity is critical for your success. A qualified and experienced attorney can help you navigate these options to protect your assets and put you on the path to business success.

Does talking about business over a meal with someone really make that meal as a business expense? - Obviously not every meal is deductible and just because you spoke to someone about your business doesn't magically turn that meal into a "business meal" - In order for a meal with clients or prospects to actually be tax deductible you would have to prove that the meal is INFREQUENT, DIFFERENT and MORE (but not excessive) than what you normally spend on meals - For example, you might normally take a $15 lunch break every day at chipotle which would be considered a personal expense. - If you decide to invite a client to Chipotle with you it doesn't make it a business meal because you frequently buy Chipotle for yourself - However if you take that same client out to lunch at the Cheesecake Factory that could be considered a business meal because you don't go there every day, it's different from your normal meals and it's probably more expensive than your $15 Chipotle - If you do decide to use your business card for a meal I've written a checklist in this videos description to help you provide documentation to prove the meal was for business - *Business Meal Checklist* 1) Take a picture of the receipt (front & back) 2) Write the date of the meal on the receipt 3) Write the names of the people who attended on the receipt 4) Write the business relationship of the attendees on the receipt 5) Write the purpose of the meeting on the receipt - Honestly, trying to lower your taxes by claiming lots of meal deductions is a poor decision because you can typically only deduct 50% of that meal and the IRS specifically looks for unusually high meal expenses on tax returns which could make you a target for an audit - If you like this type of content go ahead and follow me

Scrupulous records and legitimate business expenses are the key to less painful IRS audits. If you operate a business, you know records of income and expenses need to be kept. Specifically, you should carefully record expenses to claim all the tax deductions to which you’re entitled. And you want to make sure you can defend the amounts reported on your tax returns in case you’re ever audited by the IRS. Certain expenses, such as auto, travel, meal and home office expenses, require extra attention because they’re subject to special recordkeeping requirements or limits on deductibility. In addition to keeping good records, make sure to use your business bank account for business purposes only. A business can’t deduct personal expenses. Contact us with questions.

Is your business structure costing you in taxes?   The type of business entity you choose can make a big difference when it comes to your overall tax bill. Here's an example of how much taxes you could end up paying if your business makes $100,000 in profit:   👉 Sole Proprietorship: You pay both income tax and self-employment tax on the entire $100k. That results in a minimum tax bill of around $40k-$45k. 👉 Partnership: Same tax implications as a sole proprietorship. You pay income tax and self-employment tax on the entire amount. Again, you'll have a minimum tax bill of around $40k-$45k. 👉 S Corporation: You can split the income between a reasonable salary and profits distributions. Self-employment tax is paid on the salary portion, but not on the distributions. This strategy can potentially save you thousands in taxes. 👉 C Corporation: The business pays a flat 21% tax at the corporate level. Then, any dividends paid out are taxed again at the shareholders personal tax rate. This is known as "double taxation" which is one of the primary disadvantages of C corps.   LLCs are often misunderstood by business owners when it comes to taxes. They are not recognized as a separate entity by the IRS. Your business can't be "taxed as an LLC". Instead, they have the flexibility of being able to choose how they're treated for tax purposes. The default tax status is either a sole proprietorship or partnership depending on the number of owners. However, the business can elect to be taxed as a corporation if it's advantageous to do so. This flexibility is one of the reasons why LLCs are so popular.    If you want to keep more of your hard-earned money, choosing the right entity is an important decision. The right business structure helps you minimize taxes while also positioning you for growth. Check out my recent blog post for additional factors to consider when making this decision if you want to learn more.

Are prescription sunglasses a business expense? In most cases, they’re not considered allowable expenses for a business by HMRC, as they are typically viewed as personal items. However, there are exceptions. If your job requires protective eyewear, and prescription sunglasses are necessary for safety - particularly in outdoor environments - they might qualify as a business expense. This applies when standard non-prescription sunglasses aren’t sufficient due to the need for vision correction. In rare cases, prescriptions for work-related medical conditions might also be deductible. Understanding what counts as an allowable expense is crucial to ensuring your claims are legitimate and compliant with HMRC regulations. At Peer Accountants, we specialise in identifying and maximising allowable expenses for your business. Our expert team helps you navigate these grey areas, ensuring you don’t miss out on potential deductions while staying on the right side of tax laws. Don’t let uncertainty over what’s deductible hold you back - let Peer Accountants guide you through the complexities of business expenses. https://bit.ly/46QQ8Q9