Common Small Business Tax Questions!

What’s that saying, "the only certainties in life are death and taxes?" Well, we'd like to add a third certainty: questions about taxes. It's not a matter of if you have questions; it's a matter of when. So, we've compiled our FAQs to help you start seeing some clarity instead of confusion. (Ahh, can you feel the zen already?)

First thing, do I have to file a separate tax return for my business?

That depends on your business entity type, or how you’re legally registered. If your business is a corporation (S corp or C corp) or a partnership, then yes, you will need to file a separate business tax return, which must be completed before your individual tax return. If your business is a sole proprietorship or a single-member LLC, your business income will be reported on your personal tax return.

What things do I deduct for my business and what things do I deduct personally?

As a general rule, you can deduct expenses directly related to your business. This includes things like advertising, office expenses, dues & subscriptions, insurance, merchant fees, and shipping. You can also deduct the business-use portion of certain personal expenses, like vehicle mileage, phone, and internet. If you work from home, you can deduct a portion of your mortgage interest or rent, real estate taxes, utilities, and repairs and maintenance as part of the home office deduction.

Certain personal expenses, like health insurance premiums, medical expenses not covered by insurance, student loan interest, and donations to charity, can be deducted on your personal return but are not deductible as business expenses. So, yes, there’s a lot you can deduct. We even have a whole guide for you on this one.

Can my business pay for my health insurance?

It depends. If your business is a corporation, then yes, your health insurance should be run through your payroll. If your business is a partnership or a sole proprietorship, the business can’t pay for your health insurance, but you can still take a deduction for self-employed health insurance on your personal tax return.

Can I deduct the cost of clothes and hair/makeup supplies?

Typically, the answer is no, but there are exceptions. Any uniforms or branded clothing (like a polo or t-shirt with your logo) can be deducted. You can also deduct any clothing items required for your job, like aprons, smocks, helmets, protective goggles, or gloves. If you have a deal with a company to promote their product (clothing, makeup, hair products, etc.), then you can deduct these expenses, as you are required to purchase the items to review and promote them. If the company reimburses you for these expenses, you need to report that reimbursement as income.

Do you need my receipts?

Probably not. As long as your bookkeeping is accurate and up-to-date, we can rely on that as proof of all your expenses. The exception would be for occasional large purchases, like property, equipment, or property improvements (like replacing the floors or upgrading the HVAC system). If you bought a new business vehicle or property, we would need that purchase information as well. Basically, stuff you’re most likely going to want a receipt for anyway. So, bye-bye, dusty shoebox of receipts!

I just started my business and didn’t bring in any sales this year. Do I still need to report it on my tax return?

Yes. If your business is a corporation, you’re required to file a return each year once you officially start your business. If your business is a sole proprietorship and you had any expenses, you should still report that information on your tax return, as you can take a deduction for the business loss.

How can I work with you?

Well, let’s chat! We want to ensure we can help you with whatever your business needs, whether it be accounting, tax, coaching, or just a few random questions. Click here to book a discovery call! And while you wait, check out our other blog posts or become our besties on Instagram.