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Small Business Tax Information

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I'm assuming you want to postpone spending any money on a topic you may prefer not to touch with a ten-foot pole let alone a ten-dollar bill. So let's review some of the least expensive tax resources available. Is free a good price for you?

Believe it or not, the IRS has a plethora of free resources for the business owner. The place to start is the Small Business and Self-Employed Tax Center at www.irs.gov/businesses/small/index.html.

Now before you go there and start clicking away until your head spins, let me give you a heads up on how to best navigate the IRS web page. First, you need to know what type of business entity you own: sole proprietorship, S corporation, C corporation, limited liability company or partnership.

Once you have that basic piece of information in mind, click on the link "A-Z Index for Business" and you'll be taken to a page that is organized by the various types of business entities listed above. Under the heading "Business Types", click on your particular business type and you'll be taken to a page that provides just about everything you need to know about taxes for that entity.

For example, let's assume you are a sole proprietor. So you click on the Sole Proprietor link and you'll be taken to a page that contains a chart for all the major income tax forms you'll need, organized according to the type of tax. For income tax, there are links for forms Form 1040 and Schedule C. For Self-Employment Tax, there's a link to Schedule SE. If you have employees, there are links to the various employment-related tax forms (Forms 941, 940, W-2, etc). This is a very handy chart because it gives you the big picture for all the main types of business taxes and their associated tax forms.

Below this chart is the heading "References/Related Topics". Under this heading is a clickable list of several excellent resources that you can view online or download as free PDF files. Two of the best IRS small business publications are listed here: Publication 334: The Tax Guide for Small Business (for Individuals Who Use Schedule C) and Publication 583: Starting a Business and Keeping Records. Pub 334 is 53 pages and Pub 583 is 27 pages, so you'll get plenty of information at a bargain-basement price.

After checking out the resources applicable to your particular entity, you can return to the Small Business and Self-Employed Tax Center and find dozens of other useful articles, updates and publications. Be sure to check out the Online Learning and Educational Products link. Here you'll find both audio and video presentations by IRS staff on a number of small business tax topics.

Take advantage of these free tools and benefit from your tax dollars at work. For the small business owner who prefers not to spend a dime on tax advice, the IRS website is a great place to start.

Small Business Tax Information

First, you must get the big picture. Assuming you've been faithfully tracking income and expenses during the year, it's time to print out an Income Statement (aka Profit & Loss Report or P&L) and see where you stand.

If you don't have all your 2008 transactions input into your bookkeeping software program, it's critical that you get that done right away, otherwise you'll end the year without knowing what the numbers look like, and you'll miss out on a great tax-saving opportunity. And you'll also enter 2009 without a clue as to what your tax situation looks like. If you've got a balance due on the 2008 return, the sooner you realize that, the better.

Once you've got your Income Statement in front of you, compare the bottom line to 2007. Was 2008 better or worse than 2007? If you had a better year and are showing an increase in profit, you still have time to do something about it.

There are only two ways to reduce taxable income: reduce sales or increase expenses. Now that 2008 is just about history, there's not much you can do to reduce sales (and why would you want to do that anyway?). But you can increase expenses during the last few days of the year by making additional purchases, assuming the cash is available to do so.

So make a list of legitimate business items that you were planning to buy in 2009, and buy them in 2008 instead. This would include smaller things like office supplies (stationary, paper and the like) as well as bigger ticket items like office equipment (computers, printers, fax machines, etc).

With regard to office equipment, keep in mind that you can take advantage of the Section 179 deduction on assets purchased by 12/31. This means you can avoid the quagmire of depreciation rules and simply deduct something like a computer in the same way you deduct paper clips - it is fully deductible in the year of purchase rather than expensing it via depreciation over several years.

In addition to supplies and equipment, you can also increase expenses in 2008 by pre-paying expenses that are not due until 2009. Here are some examples: advertising, utilities, rent, and insurance. Perhaps you've received a bill for these items in 2008 but payment isn't due until January. Go ahead and pay it now.

One final comment: Keep in mind that if you wait until 2009 to make these purchases, you'll get the same deduction and the same resulting tax savings (assuming you're in the same tax bracket). So what's the benefit? Timing. Think of it like this: I have $350 and I'd like to give it to you. When do you want it? Now or later? Probably now, right?

Well, if you have $1,000 to spend on business deductions and you are in the 35% tax bracket, the IRS has $350 it would like to give you. When do you want it? This year or next year? It's up to you, but good business sense would say to take it now. Get the money a year earlier and use it to your advantage.

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Wayne M Davies has sinced written about articles on various topics from . Wayne M. Davies is author of 3 ebooks on small business tax retudction strategies. For a free copy of his Special Report "How To Instantly Double Your Deductions", visit

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