Running a small business is not for the faint of heart, but it can certainly be rewarding. After all – you’re doing what you love to do! But tax season can have even the most seasoned of entrepreneurs running for the hills. At Polston Tax, it’s our job to help make your taxes a breeze, and we like to look out for our small business owner friends. This week, we’re focusing on Landscapers and Gardeners. Here are a few tips to help you guys and gals plant some seeds for tax savings and grow your returns come April. (See what we did there??)
Find the Right Accounting Method
It’s key for small business owners to establish an accounting method – or set of rules for when to report income and expenses – that works best for them. Most small businesses use a cash method, reporting income in the year it’s received and deducting expenses in the year in which they’re paid. But there are a number of options available to you. Be sure to check out IRS Publication 538, Accounting Periods and Methods.
The Four Business Taxes
Be sure to remember the four types of business taxes when filing your tax return. These include: income tax, self-employment tax, employment tax, and excise tax. If you make a profit, you may need to pay both an income tax and a self-employment tax. A self-employment tax includes both Social Security and Medicare taxes. You may also need to pay your taxes by making estimated tax payments. But fear not. Estimated tax payments can be easily resolved through IRS Direct Pay. Easy as pie!
Tax Forms to Know
When reporting self-employment income, there are two types of forms you may need to include:
Schedule C or Schedule C-EZ Form
When filing your Form 1040, you must include either a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business form. If your expenses totaled less than $5,000, you may be able to use the Schedule C-EZ form. Be sure to check out the form instructions to find out which form is appropriate for you and your business.
Schedule SE Form
Use the Schedule SE, Self-Employment Tax form, to file your SE tax with your federal tax return.
Allowable Deductions: Ordinary vs. Necessary
You may deduct business expenses if they are either ordinary or necessary. An ordinary business expense is one that is common and accepted in the gardening or landscaping industry (think: mulch and other supplies). A necessary business expense is one that is helpful or proper for your trade or business (e.g. professional training for new employees).
Have questions about deductions? Check out the IRS webinar, “Small Business Owners: Get All the Tax Benefits You Deserve.”
Racking up the mileage on your business car, van, or truck? Be sure to log mileage and gas usage because you may be able to deduct operation costs for your business vehicles. Take a look at IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses for details on how to benefit.
For more tips on how to make the most of your tax return, be sure to check out the IRS webinar “Business Taxes for the Self-Employed: The Basics.”
We hope this helps to answer some of your most common tax concerns. But if you’re still feeling lost, remember: we’re here to help! Be sure to browse our services page and fill out the form for a free consultation. Or give us a call at 844-841-9857!