It is advised that those who entered self-employment or launched their own business in 2022 hire a licensed accountant to handle their tax returns. This professional advice results from the fact that working with a specialist can assist business owners in maximizing their deductions and ensuring that they are in compliance with tax laws. In this article, we'll look at some of the reasons why new business owners should think twice before attempting to handle their own taxes.
Section 1: The Complexity of Tax Deductions
Expert knowledge of the many deductions available to business owners is a key benefit of hiring a professional accountant. It's possible that many aspiring business owners are unaware of the potential tax benefits for regular and necessary business expenses. Louis Barajas, an enrolled agent, and Opportunity Coach on the PBS program Opportunity Knocks. It emphasizes that the majority of people are unaware of the deductions they are eligible for.
Section 2: Understanding Ordinary and Necessary Expenses
It is crucial for business owners to comprehend what expenses qualify as ordinary and necessary within their industry before attempting to write them off. Grant Dougherty, an enrolled agent and founder of Dougherty Tax Solutions, advises entrepreneurs to check whether an expense is ordinary, necessary, and reasonable for their specific business.
Section 3: Overlooked Deductions
Apart from common business expenses, certain deductions often go unnoticed by first-time business owners. Louis Barajas highlights two specific deductions: the home office deduction and Section 179 depreciation.
- Home Office Deduction: This deduction allows business owners to claim expenses for areas within their homes used and only for business purposes. But, it's important to note that the designated space must also serve as the principal place of business, as outlined by the IRS.
- Business owners can write off the entire cost of qualifying assets such as computers or printers. Instead of depreciating them over time, thanks to the Section 179 Depreciation provision. This deduction offers significant benefits and should not be overlooked.
Section 4: Avoiding Costly Mistakes
According to Louis Barajas, many people have prepared their own tax returns for their businesses. Also, rental properties make mistakes that need amendments. To prevent potential complications, it is wise to seek professional help when dealing with complex tax matters.
Conclusion:
First-time business owners should think about the benefits of working with a qualified accountant to prepare their taxes. They can enjoy expert knowledge, maximize deductions, and guarantee precise compliance with tax regulations by doing this. Building a solid financial foundation for any business requires avoiding costly errors and maximizing tax savings.
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