Small Business Taxes with Mike Ball

by CHZ



Regardless of whether you are just starting your business or have been in business for awhile, one thing that will always remain is that you will have to deal with your business taxes. California licensed tax preparer and IRS Enrolled Agent, Mike Ball of Sequoia Tax is sharing the importance of setting up your finances, what you can expect regarding quarterly tax payments, what exactly are write-offs, and why you shouldn’t fear the IRS. When I think of write-offs, I always think of Seinfeld and it makes me chuckle. We’re keeping up the banter, but Mike is also sharing some invaluable information on what you can and need to do to be IRS ready!

Your next tax payment is due in just over a month…are you ready for it?

What we’re talking about

Setting Up Your Finances In Your Small Business What Are Quarterly Tax Payments? The 411 On Write-Offs and Audits Setting Up Your Finances In Your Small Business

Small businesses are defined by the IRS as any business that has less than $25M in gross receipts. As a small business, Mike recommends you save 15% of your gross receipts for self-employment tax, which is the equivalent of social security holdings. You should keep track of what you’re doing in your business with income and expenses and track it either online on a platform such as QuickBooks or manually. If you decide to incorporate yourself in the state of California (because that’s where Mike and I are), or get an LLC, you need to ensure you keep your personal finances separate from your business finances. You also need to keep copies of everything, such as your form SS-4 when you become incorporated. Mike suggests keeping these finances at a handshake’s distance.

All small businesses should have a tax preparer and not attempt to DIY things when it comes to taxes. An important reminder is that if you file an extension on your tax return, it’s not an extension on paying your taxes! Penalties will be assessed if you don’t pay them on time.

What Are Quarterly Tax Payments?

Quarterly tax payments are actually estimates on what you will owe for your taxes. If you aren’t sure what to pay, there’s a safe harbor which covers you if you pay at least 100% of what you paid in the previous year. You won’t be assessed penalties if you make such payments and end up owing more. Since quarterly payments are dynamic, you should regularly talk to your tax professional to determine how much you should pay and these payments shouldn’t come as a surprise to you.

Remember that even if you aren’t aware of a compliance issue, such as a county tax, you’re still subject to it and ignorance is not an excuse!

The 411 On Write-Offs & Audits

Kramer : It’s just a write-off for them.

Jerry : How is it a write-off?

Kramer : They just write it off.

Jerry : Write it off what?

Kramer : Jerry, all these big companies they write-off everything.

Jerry : You don’t even know what a write-off is.

Kramer : Do you?

Jerry : No. I don’t.

Kramer : But they do and they are the ones writing it off.

Are you like Jerry Seinfeld and wondering what you can write-off? Mike says that for many people, write-offs make them feel guilty or they’re simply hesitant to take a deduction. Don’t be! If there’s a business purpose that isn’t frivolous, then it’s a write-off and you should take it.

There is a bonus depreciation default which is 100% for things such as buying a new computer. Whether you have income or not, you can take the deduction, even if it puts you in a negative situation. That negative number can also be carried into the next year. A word of caution though, if you show no net income for 3 out of 5 years, then the IRS may refute your deductions and tell you that you have a hobby and not a business. If you truly have losses and can prove it, then you should be ok.

If you’re working from home, which we all are right now, then you can take the home office deduction. This is much more beneficial if you rent your home because you aren’t already taking deductions for your property tax and mortgage interested in a Schedule A.

Mike says one of the most important things you can be is audit proof. Keep track of everything and if you receive a “friendly letter,” otherwise known as an audit, then deal with it and respond in a timely manner.

Are you audit proof in your business?

LINKS MENTIONED

Sequoia Tax

www.sequoiatax.com

Sequoia Tax’s Facebook

https://www.facebook.com/Sequoia-Tax-110682507238219/

Sequoia Tax’s LinkedIn

https://www.linkedin.com/company/sequoia-tax-associates-inc/

Mike Ball’s Email

[email protected]

Mike Ball’s Phone Number: 669-293-0593

Quickbooks Online

http://fbuy.me/ob3r3

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1 comment

Alix Mortimer November 19, 2020 - 2:32 pm

🙏 Nice work!! You should take a look at smzeus”dot”com!!! ! I’ve been using it on my other channel to promote my videos!

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