Business Tax Questions and Answers
Taxes are inevitable, and while both small and large corporations follow the same general guidelines, there are many caveats that change the way businesses approach taxes. One of the biggest factors is profit. Every company, no matter the size, is looking for ways to capitalize on benefits and deduct where they can. To assist businesses, North Georgia Tax Solutions has compiled and answered some of the most frequently asked tax questions.
Question 1: What are the tax benefits of leasing a car vs. buying a car?
When it comes to buying versus leasing, it’s important to initially look at it from a business perspective The question that should be asked is, “Will the miles driven go beyond the annual mileage cap?” If not, leasing could be a great option, especially if you’re wanting to lease a car that would otherwise be out of your budget. However, if you’re expecting to put a lot of miles on the car, leasing may be more expensive. From a tax perspective, you can deduct the pro-rata business portion of a vehicle whether you’re owning or leasing. However, we recommend consulting North Georgia Tax Solutions as the final answer is different in every scenario.
Question 2: Can personal expenses be deducted if I’m self-employed?
With self-employment comes perks and downfalls. We are often asked if those who are self-employed can deduct personal expenses such as their mortgage/rent, phone bill, education, car, etc. When it comes to these personal expenses that cross over into business territory, it’s important that you can support your expenses with documentation. The pro-rata business portion of expenses may be deductible. If you’re looking to write off home office expenses, there must be an area in your home that is used exclusively and regularly for business. If you’re looking to deduct home office expenses, be ready to provide documentation for maintenance, utilities, square footage, and more.
Question 3: What items can be deducted as business expenses?
When looking at what can be written off as a business expense, there are two important questions to ask yourself: Is it ordinary? Is it necessary? These questions help you determine if the expense incurred is something that is common in your industry and is also helpful to your business. Some other deductions include retirement plans, rent, insurance premiums, advertising, meals, subscriptions, and startup costs.
Question 4: Can an employer reimburse an employee for health insurance premiums if they don’t offer insurance?
When it comes to health care reimbursement, employees cannot receive a tax-free health care reimbursement from their employer. This form of reimbursement must be recognized as additional income and is taxable as such. However, there are health reimbursement arrangements that allow companies to set aside or reimburse money through a Qualified Small Employer HRA, Individual Coverage HRA, or Excepted Benefit HRA. This the most cost and tax-effective way to assist employees with health insurance costs.
Question 5: What are the most important records for businesses to keep for tax purposes?
Records are key when it comes to taxes. Just a few of the most important records to keep include:
- Receipts
- Bank statements
- Invoices
- Payroll records
- Supporting documents
- Employment tax records
Though we hope this will help you have a better idea of what is needed from you when tax season comes back around, it can’t replace having access to a tax accountant who can walk you through the process and answer any questions you may have.
