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Money-saving, year-round tax tips for small business owners

(ARA) - Small business owners face a variety of financial challenges, from securing financing and creating a marketing plan, to maintaining accounting books and minimizing tax liabilities. Regardless of whether business owners do the bookkeeping themselves or outsource it, they are responsible for staying organized and strategizing to increase the bottom line.

Standard deductions, such as automobile expenses, must be tracked on a regular basis. Automobile expenses can either be tracked by multiplying mileage by the standard mileage rate of 55 cents for 2009, or by claiming the actual business-related expenses for the vehicle. (Note that standard mileage rates cannot be included on Forms 1065, 1120 and 1120S.)

In addition, travel expenses can include the cost of plane tickets, taxis or vehicles, as well as lodging and meals if the primary purpose of the trip is business. When family or friends accompany the business owner, just the owner's travel expenses can be deducted. Expenses related to advertising, promotions, interest on borrowed money (with record of where and how the money was spent) and bank fees are also fully deductible.

The amount and purpose of all expenses should be documented and tracked in the event that the IRS requests proof of expenditures. A receipt-scanning program such as Shoeboxed helps users to quickly and easily store and categorize receipts with deducible expenses. Mileage logs should include odometer readings, total miles driven, percent of mileage used for business, destination and purpose of the trip.

Other expenses are more challenging to discern, but the time taken to research and document them can save thousands of dollars in taxes owed. Legal and professional fees are generally deductible in the year they are incurred. However, if the consultation relates to future years, the fees must be deducted over the life of the benefit. Business entertainment expenses may be 50 percent deductible if business is discussed during the gathering. The business purpose and attendees should always be noted on the receipt or bill.

Higher contribution limits for 2009 allow business owners to save additional retirement money. For example:

* SEP and profit-sharing plan limits increased from $46,000 in 2008 to $49,000 in 2009.

* The defined benefit (pension plan) limit increased from $185,000 to $195,000.

* 401(k) elective deferrals are now $16,500 versus $15,500 in 2008. In addition, those age 55 or older can contribute another $5,500, up from $5,000 in 2008.

The 2009 tax year brings changes that can minimize tax liability for all small businesses. A tax-free reimbursement for bicycle commuting can be passed onto employees, up to $20 per month for buying, maintaining and storing a bicycle used to travel to and from work. Businesses with Health Savings Accounts (HSAs) can contribute more this year, up to $3,000 for individual high deductible health plans, and $5,950 for family coverage. Those 55 years and older can add $1,000 to those amounts.

Don't overlook the small stuff because it all adds up. Deductions for bad debts (goods sold, not services), customer gifts, business-related books, postage, seminars and trade shows, business association dues and even coffee exist.

At the end of the day, small business owners need to find an expense tracking and filing system that works best for them. The old-fashioned use of folders categorized by expense type or date range is ideal for some. Others prefer technological solutions, which also provide data back up. Important receipts, charitable contributions, bank statements, credit card bills and other key documents can be scanned and filed by fiscal quarter. Owners should make copies for themselves or their accountant.

Tax software can be used throughout the year to help small business owners understand how different financial decisions can affect their tax situation. By organizing early, owners can plan ahead, maximize deductions and save time when it's time to prepare their tax returns. TaxACT customers who pre-order their Preparer's Business software can use preview versions as soon as they're released. Preview versions of TaxACT Preparer's Business 1065, 1120 and 1120S are released in October, with final versions released in January.

Detailed tax information for small businesses is available at www.IRS.gov, and TaxACT product information can be found at www.TaxACT.com.

Courtesy of ARAcontent

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