Tax implications for a small business owner are important because they affect how much money a small business owner owes the Internal Revenue System (IRS) each year.
There are some things that are acceptable tax write-offs and other things that are now.
Knowing tax laws and how they impact your business can determine if you are paying the IRS all the taxes you owe them or if you may be paying too much.
Charitable Contributions & Their Effects on Taxes:
One such factor that can help lower the amount of taxes you owe to the IRS are charitable contributions your company makes.
These contributions can often be written off your taxes, however, there are some rules that one must follow to claim charitable contributions off of their taxes.
Some of those rules are as follows:
- Charities will have to be tax-exempt, generally meaning they have 501(c)(3) status.
- The contribution must be eligible for a tax write-off such as cash donated, sponsorships for a charity event, time donated (taken away from work), etc. understand the limitations on such donations before making them.
- Understand that every category will have limits on how much can be written off of taxes for your donations. The IRS can provide more information as to what these limits are for your specific company and tax bracket.
- Be sure to make the entire donation and claim it by the end of the tax year.
- Remember the IRS limits all charitable contributions to 50% of one's gross income each year.
- Keep records to prove where your donations went so you can supply the information to the IRS when filing your taxes.
If You Outsource Your Taxes:
If you outsource your tax returns to a professional, outside agency, you will need to ensure you enclose any charitable contributions you made with your tax return information.
You should include proof of your donations as well (i.e. receipts, photocopies of checks, bank statements, etc.) so those deductions can be made from your taxes accordingly.
Please feel free to contact LUXA Enterprises for more assistance and information. We focus on helping small busines owners with outsource accounting services and virtual CFO services.