Transcript Community Tax Centers

RECORD-KEEPING AND BUSINESS
PLANNING:
A Road Map to Financial Success
Why should I file taxes?
There may be legal penalties if you don’t file
taxes
It helps you track your income and expenses
You may get a refund
You will pay into your Social Security account
It may help your immigration status
It may help you buy a home
It may help you get a loan
It may help you sell your business
Why should I keep records?
You want to know how much your income is
You want to know how much your business
expenses are
You want to know whether you are making a
profit
It’s hard to reconstruct records a year later –
you may miss some expenses
Why should I keep records?
It’s in your interest
You may get a larger refund on your tax return
You’ll pay more into your Social Security account
It may help with immigration status
It may help you get a business loan
It may help you sell your business
It may help you buy a home
You’ll sleep better knowing you have a good
understanding of where your money is coming in and
going out
Rules Of Good Record-keeping
Keep Up-to-Date Records
Track Business Income
Save & Organize Receipts
Review Records Weekly
Track Your Time
Reconstruct Immediately
Save Your Tax Records at Least Three Years
Sole Proprietor
Simplest and most common type of entity
Formed when an individual goes into business
Business and individual are one and the same
Business income is taxed on individual’s tax
return
“Other” Taxes
Real property taxes – only if your business
owns land or building
Personal property taxes – tangible
personal property used to produce income.
Reported and paid to county appraisal
district.
State sales tax – collected on taxable goods
and services and paid to State
Federal Taxes
You may owe both income tax and selfemployment tax
Self-employment tax = FICA: Medicare and
Social Security taxes. You pay both employer’s
and employee’s share of these taxes. 15.3% for
2010; 13.3% for 2011
Estimated taxes are due on 15th of January,
April, June, and September. Form 1040-ES
Income Tax
Net income = gross income – business expenses
Gross income is every dollar your business earns
5 categories of business expenses
1.
2.
3.
4.
5.
Ordinary business expenses
Depreciation
Start-up costs
Taxes
Shared expenses
Ordinary Business Expenses
Must be ordinary, necessary and reasonable for
your trade or profession
Not inventory and not capital expenses
Exs.
Advertising
Office expense
Tools
Insurance
Vehicle expenses
Supplies
Repair & maintenance
Contract labor
Depreciation
Deduction for capital expense – item that lasts
longer than 1 year and costs more than $250
Spreads the deduction over several years – IRS
determines how many
Section 179 exception
Requires more record-keeping
Start-up Costs
Expenses before your business opens
Deduct up to $5K in first year your business is
open
Deduct remainder over next 15 years
Exs:
Licenses
Attorney
Equipment
Market research
Tax Expenses
You can deduct local taxes paid
If you have employees, you can deduct
employment taxes
If sales tax collected is included in your income,
you can deduct it when you pay it to the State
You can deduct one-half of your selfemployment FICA taxes
Shared Expenses
Things you use both for your business and
personal, such as a vehicle or cell phone
Some are shared generally, some because
business is home-based
May deduct only business-use percentage
Unless home-based day care, home office must
meet “exclusive and regular” test
Business Use of Vehicle
Two methods:
1. Actual expense. Keep mileage log and all
receipts.
2. Standard mileage expense. Keep mileage log.
Commuting miles not deductible. 2010
standard mileage deduction 50 cents/every
business mile.
Record-Keeping Tips
Remember, receipts are best!
Bank records, statement printouts, cancelled
checks, credit card statements
Keep all records for business related expenses:




Business cards, ads in paper
License, class fees
Business insurance
Supplies, postage
Community Resources
BIG Austin 928-8010
PeopleFund 472-8087
ACCION Texas 866-312-3771
SBDC 210-458-2020
City of Austin Small Business Center 974-7800
SBA 210-403-5900
LAMP of TRLA 374-2700
QUESTIONS?