Small Business Taxes 101
for
Sole Proprietorships
Tax laws and regulations change frequently, and their
application can vary widely based on the specific facts and
circumstances.
You are responsible for consulting with your own professional
tax advisors concerning specific tax circumstances.
The Knoxx Group disclaims any responsibility for the accuracy
or adequacy of any positions taken by you in your tax returns.
What We Will Cover
• Filing Taxes
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Tax Forms
Importance of Keeping Good Records
Proper Documentation
DIY Software vs. Professional
• Categories
– Income
– Cost Of Sales
– Expenses
Form 1040 – Income Tax Return
One of the official documents that U.S. taxpayers can use
to file their annual income tax return.
Schedule C – Profit or Loss from Business
Report how much money you made or lost in your
business.
Form 8829 – Expenses for Business Use of Home
Calculates the expenses related to using your home for
business.
Schedule SE – Self Employment Tax
Calculates the self-employment tax you must pay.
Required if you earn net profits of $400 or more. Some of
the payments are tax deductible.
Good Records
Good records are important for your
business because they:
– make filling in your tax returns easier and
quicker
– make it quicker for you or your accountant to
do your taxes, which saves you time & money
– provide information you need to manage your
business and help it grow
– Is required by law
Documentation
Income
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Sale Receipts
1099-Misc
Bank Statements
Merchant Statements
(i.e. paypal, square)
Expenses
• Receipts
• Bank Statements
• Inventory Records
D.I.Y.
vs.
DIY Software
Professional
• Price is cheaper
• Software can walk
you thru the process
• http://www.irs.gov/Fil
ing/E-File-Options
Professional
• Cost More
• Detailed
understanding of tax
laws to get you
maximum benefit
Income & Cost of Sales
Income
• Sales from product or services.
• Bartering for products or services.
Cost of Sales
• If you make or buy goods to sell, you can deduct
the cost.
• You must value your inventory at the beginning
and end of each tax year.
Expenses
A business expense must be both ordinary and necessary. An ordinary expense is
one that is common and accepted. A necessary expense is one that is helpful and
appropriate. http://www.irs.gov/Businesses/Small-Businesses-&-SelfEmployed/Deducting-Business-Expenses
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Accounting/bookkeeping
Advertising
Bank service charges and fees
Business gifts
Business meals (50% is deductible)
Computer, printer, and software
Consultant fees
Depreciation and amortization
Dues for professional and trade
associations
Education expenses for maintaining
or improving required skills
Email, Internet access, and web
hosting services
Fax machine
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Insurance expense
Legal and attorney fees
License fees and taxes
Merchant account or credit card
processing fees
Office furniture and equipment
Office supplies
Online services used for the business
Parking and tolls
Postage and shipping
Printing and duplication
Self-employment taxes
Start-up expenses
Telephone expense
Travel expenses
Vehicle
Home Business Expenses
You can deduct business expenses for your home if:
• The part of the home used exclusively for business is your primary place of
business
• You meet with clients, patients, or customers there for business purposes
• You use the space regularly for storage facility or day care center
Based on Value of House and percentage of home used for business
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Mortgage Interest / Rent
Real Estate Taxes
Property Insurance
Repairs & Maintenance
Utilities
Resources
IRS – Business Deduction Website
http://www.irs.gov/Businesses/Small-Businesses-&-SelfEmployed/Deducting-Business-Expenses
IRS – E-filing Options
http://www.irs.gov/Filing/E-File-Options
Contact Info
R. Joyce Heard, CPA
(615) 625-6211
contact@knoxxgroup.com
www.knoxxgroup.com