Money Rehab with Nicole Lapin - Tax Hacks for Small Businesses

Episode Date: March 28, 2023

We're nearing Federal Tax Day... which, we can all agree is the worst national holiday these 50 states have to offer. But regardless, we have to celebrate by submitting our tax returns. If you're a small business, don't miss these five tax hacks!

Money rehabbers, you get it. When you're trying to have it all, you end up doing a lot of juggling. You have to balance your work, your friends, and everything in between. So when it comes to your finances, the last thing you need is more juggling. That's where Bank of America steps in. With Bank of America, you can manage your banking, borrowing, and even investing all in one place. Their digital tools bring everything together under one roof, giving you a clear view of your finances whenever you need it. Plus, with Bank of America's wealth of expert guidance available at any time, you can feel confident that your

money is working as hard as you do. So why overcomplicate your money? Keep it simple with Bank of America, your one-stop shop for everything you need today and the goals you're working toward tomorrow. To get started, visit bofa.com slash newprosmedia. That's b-o-f-a dot com slash n-e-w pros p-r-o-s media. bfa.com slash newprosmedia. I'm Nicole Lappin, the only financial expert you don't need a it's time for some money rehab. We are quickly approaching April, which means that it is almost financial literacy month. It also means it is almost federal tax day. And listen, I'm not going to sugarcoat it. Filing taxes sucks. Even though I love nerding out on money stuff, I'm not going to lie to you because I never do. I hate tax season. Yeah, I hate it. Just like you do. Even when I get money back from the IRS, I still hate it because a tax refund is not free money from the government.

It's exactly what it says it is. It's a refund. It's the IRS giving you your money back that they overborrowed and are now playing nice and giving back. Hate it so much. Today's rant is over. Thank you for coming to my TED Talk. But today is not for a rant. Today is for tax hacks for small business owners. But before we get there, let's have a little heart to heart here because I know you're a boss, duh, but if you aren't doing a couple of things first, then all the tax tips in the entire world are not going to help you out. So here's one of them. Do you have a phone, a friend, aka an accountant? There is no shame. If you do, I do. Shout out to Maria. Remember, tax people need tax people. Financial experts

need financial experts. Trainers need trainers. Trinks need trinks. So why do I have one? Well, because I am a busy human and taxes are complicated and I don't want to mess them up. Someday I'll do an entire episode on why taxes are so complicated, but it's because big tax companies basically spend a lot of money to make paying your taxes as difficult as possible. Because if taxes were so simple, these big companies would be basically out of a job, which leaves us with an intentionally complex tax code. So as long as that's the case, and there is no end in sight that I can see, you may need an accountant. And there is no shame in asking for help, especially with this stuff. And a good accountant, by the way, will pay for themselves

through saving you money on your taxes. That is a win-win. Now let's dig into my five tax hacks for small business owners. Number one, incorporate. Now that you have an accountant and all of your records are in order, make sure you're using the best corporate structure for your type of business. From sole proprietorship to a B Corp, there are several types of business structures available to owners. They each come with different tax burdens and liabilities, of course. So you need to know exactly what your profile is in order to determine what type of structure is best for your business. It's also important to know that as your business grows and evolves, of course it will, different types of business

structures may become more efficient. So it's okay to change. Lots of business owners do. So it's worth checking with your accountant from time to time to make sure you're currently using the best, most beneficial structure for you at that time in order to save you and your business money. Number two, set up that home office or workspace. Now, unless you happen to be a TV reviewer or a couch maker, you can't claim your couch. It needs to be like a whole dedicated workspace. Be sure to save all of your receipts, of course. The added bonus here is that you have a dedicated office space in your house. You can claim that space as a deduction. There's a simple way to do this, which is just to figure out the square footage of your office space, or if you're a blacksmith, your workshop, and multiply that square footage by $5. For most

folks, that should be just fine. But if you live in a high cost of living area like Los Angeles or New York, or if your workshop is over 300 square feet, it's worth checking to see if you should take your deduction in a little bit more of a complicated way, this is the kind of question you should ask that lovely accountant you hired. Number three, write off your travel. Now, travel is a qualifying business expense, even if you do mix business with pleasure. Hotels, airfare, car rentals, meals, working drinks, all tax deductible. To expense your entire vacation, it must be only business. For example, if you attend a seminar in Florida or are visiting a client in California, that could be qualifying travel. When you mix business and personal trips, you can only deduct the portion that is for travel. So that means that a week-long vacation during which you attend a four-day seminar,

you would be able to deduct airfare and four days of lodging. Number four, give back. Most people know that they can donate to charity and then take a deduction. And many small business owners do just that through fundraising or charitable work in their communities. It can be a great way, of course, to help others. We are all about that. Very bullish on helping. Raise your brand's profile and save you money all at the same time on your taxes. But did you know that instead of donating goods or money to that charity, you could donate stocks? That's right. You can also claim the current market value of that stock. So if you paid $20 a share and now it's worth $30 a share, you can get a $30 deduction. This is a little bit of a sneaky way to get more value for that deduction. Number five, give your retirement account some love. Now, so far we've talked

about deductions, but this final tip is a tax credit. Deductions reduce the amount of income you owe on taxes, but credits reduce the amount of taxes you owe. If you or your employees don't have retirement plans, you can receive a tax credit for setting up qualifying plans like a 401k or 403b. You can also get credit for the administrative costs and costs you incur for educating your employees about the new plans. To claim these credits, you need to file an 8881 form.

This is a great way to help your employees plan for their futures and reduce your tax burden at the same time. For today's tip, you can take straight to the bank. Not every company makes money in the first year, but your loss can also be your tax gain. When you do finally start bringing in the big bucks, you can reduce your tax bill by taking the net operating loss deduction, a deduction based on your losses for the prior year. This can help you keep more of your money to reinvest in your business. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes. Do you need some money rehab? And let's be honest, we all do.

So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at Money News and TikTok at Money News Network for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.