The Pocket Small Business Owner's Guide to Taxes

The Pocket Small Business Owner's Guide to Taxes

by Brian Germer


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When does nontaxable business income become taxable? How do you calculate the cost of goods sold? What can be deducted? What is a fixed asset? This no-nonsense guide answers these common questions and more, empowering small business owners to understand how and why they are taxed and maximize their deductions. You’ll learn when depreciation begins, how to classify payments to employees, how to track inventory and sales, and strategies for successful accounting.

Coverage also includes:
  • Tax benefits for employers
  • Business classifications
  • S corporation tax issues
  • Deductible expenses
  • Retirement plans
  • Shareholder loans
  • Family employee payroll
  • And more  
Taxes can be intimidating and confusing, especially for a small business owner who may have only handled individual taxes in the past. Understanding the tax system is essential for all small business owners, whether they are filing on their own or with the help of an accountant. When it comes to running your finances, knowledge is power, and The Pocket Small Business Owner's Guide to Taxes puts the power in your hands!

Product Details

ISBN-13: 9781581159202
Publisher: Allworth
Publication date: 10/09/2012
Series: Pocket Small Business Owner's Guides
Pages: 240
Sales rank: 1,252,716
Product dimensions: 5.20(w) x 8.10(h) x 0.90(d)

About the Author

Brian Germer has over ten years of experience in public accounting and has worked closely with small businesses in providing tax and financial statement services, as well as QuickBooks consulting, accounting system design, audit representation,
and tax planning. Brian also writes articles for PDXCPA, a Portland small business tax blog. Brian is a CPA licensed in the State of Oregon.

Table of Contents

Introduction vii

Part I Essentials for the Small Business Owner 1

1 Small Business Taxation Basics 2

Are You Self-Employed or an Employee?

Self-Employment Tax and the Corporate Equivalent

Income Tax

Payroll Taxes

Penalties, Fees, and Other New Revenue Raisers

State and Local Taxes

2 Business Income: Where it All Begins 7

What is Taxable Business Income?

What is Not Taxable Income?

When Does it Become Taxable Income?

Service Business Income Reporting Issues

3 Cost of Goods Sold: Tracking the Flow of Costs 13

What is Cost of Goods Sold?

How Do I Track Inventory and Cost of Goods Sold?

4 Business Deductions: What, When and How Much? 20

What Can Be Deducted?

What Cannot Be Deducted?

When Can the Deductions Be Taken?

How Much Can Be Deducted?

5 Fixed Assets and Depreciation 25

What is a Fixed Asset?

When Does Depreciation Begin?

What Assets Cannot Be Depreciated?

What is the Section 179 Deduction?

What is Bonus Depreciation?

What is MACRS Depreciation?

Special Cases

Repairs vs. Improvement

Sale, Disposals and Trade-ins

6 Deducting Payments to Workers 42

How Should I Classify Payments to Workers?

Do I Need an Employer Identification Number?

What is Taxable Employee Compensation?

When is Payroll Reported and Deducted?

Which Payroll Taxes are Employers Subject To?

When are Payroll Tax Deposits Due?

What Payroll Tax Reports are Required?

7 Accounting: The Key to Tax Savings & Success 59

Why is Accounting Important?

The Essential Accounting Basics

What is an Accounting System?

What are Accounting Methods?

When is an Accounting Method Selected?

The Cash Basis Method

The Accrual Basis Method

Can I Change Accounting Methods?

Avoid Tax Reporting Over-Complication

How Should I Keep My Records?

The $200 Accounting Solution Myth

Strategies for Efficient Setup of Accounting Software Files

Maintaining Organized and Accurate Books

What Your Tax Professional Should Provide

Part II Business Structure 79

8 Choosing Your Form of Business 80

Business Structure Considerations

Business Structure Options

9 S Corporation Tax Issues 93

S Corporation Basics

The Most Popular Tax Benefit of the S Corporation

What are Distributions?

What are Shareholder Loans?

Shareholder Basis: The Key to Deductible Losses

Reporting Health Insurance for Shareholders

Late Filing Penalties

10 Limited Liability Company Tax Issues 113

Self-Employment Tax

Basis for LLC Members

Late Filing Penalties

Part III Maximizing Your Deductions 123

11 Maximizing Your Deductions 124

The Correct Way to Maximize Your Deductions What is Deductible?

12 Vehicle Deductions 134

What Qualifies As Business Use of a Vehicle?

Maximizing Your Business Miles

How is the Vehicle Deduction Calculated?

Which method Provides the Larger Deduction?

Depreciation and Disposal Considerations

All Vehicles Are Not Treated Equally

Maximizing Your Vehicle Depreciation Deduction

Bonus Depreciation

Disposition of Vehicles

13 Travel Expenses 153

Travel vs. Local Transportation Expenses

What is Considered Traveling Away From Home?

Where is Your Tax Home?

What is Deductible?

Many Ways to Travel, Many Different Rules

14 Meals and Entertainment Expenses 171

What Entertainment Can Be Deducted?

Two Tests of Deductibility

Limitations on Meals and Entertainment

How Much Can I Deduct?

Personal vs. Business Entertainment

Country Clubs and Golf and Athletic Clubs

Entertainment Expense Recordkeeping

15 Retirement Plans 182

Why Set Up a Retirement Plan?

Understanding the Basics of Retirement Plans

The Individual Retirement Account (IRA) Alternative

Qualified Plan Contribution Limits and Tax Considerations

Simplified Employee Pension Plans (SEPs)

Solo 401k (Individual 401k)


The 401k

Profit Sharing Plan (PSPs)

Defined Benefit Plan (DBPs)

Other Options for High-Income Business Owners

How Do I Setup a Retirement Plan?

Tax Credit for Starting a New Plan

16 Office in Home Deduction 197

What Qualifies as an Office in Home?

Corporations and the Office in Home Deduction

Calculating the Office in Home Deduction

Advantage to Renters

The Depreciation Tax Trap

17 Tax Benefits for Employers 210

The HIRE Act-Make Sure You Didn't Miss It!

Small Business Health Care Tax Credit

18 Family Employee Payroll 222

Eligible Business Structures

Eligible Family Employees

How the Strategy Works

How Much Should I Pay Them?

Reduced Tax Savings for the Ineligible

Index 227

Customer Reviews