However, if you feel that your financial situation may be somewhat different from those of your colleagues, then you must also prepare yourself for the possibility that you will need to pay some tax to the government. In order to keep away from getting into legal trouble with the IRS, it is always advisable to prepare and do your taxes as early as possible. If you are a small business owner, then the simplest way to minimize your tax liability is to form a corporation. Although this corporate structure is not allowed by the law, many owners prefer to use it so as to reduce their tax liability. Even though a corporation is formed on your behalf with the help of a lawyer, it still pays to know the basic information about small business taxation.
When doing your small business tax return, one important area that you need to take note of is your share of the profit. Your accountant or certified public accountant will give you the full profit figure that you need. In most cases, the standard deduction and the standard rate of tax apply to business income. However, there are also certain small business deductions that you may qualify for such as a home mortgage interest expense, state and local taxes, charitable contributions, and even some medical expenses. If you can deduct all these expenses, then you can certainly lower your taxable income.
A second area where you may have to get your ducks in a row when it comes to the taxation of individuals and small business is the use of a personal residence. Generally, individuals who live in their own residences are not liable to pay income tax. However, if you do not want to pay the tax on the income that you earn in your residence, you may have to pay property tax. This can be a huge hole in your pocket if you happen to be a small business owner or an entrepreneur.
The last area in which you need to understand the taxation of individuals and small business comes in the form of corporate tax. Similar to income tax, corporate tax is calculated by taking your business’ gross receipts. These receipts are then multiplied with your company’s tax basis to come up with the company’s taxable income. Unlike income tax, the profits that are earned in a corporation are exempt from taxation. However, this is an advantage that is given up because of the extremely complicated regulations that surround corporate tax.
The fifth area that needs to be covered when it comes to the taxation of individuals and small business is the Alternative Minimum Tax. This is often times referred to as AMT. If you fail to include enough income or have to pay an excessive amount in taxes, then you will be taxed with the Alternative Minimum Tax. If you are not sure what this means, then you should take my AAT article or consult a tax professional to explain it to you. The important thing to remember is that before you take my AAT examination, you must first learn about AMT.
The final topic that I am going to cover with regards to the taxation of individuals and small business is capital gains. Capital gains tax is calculated differently depending on if the gain occurred during the year of investment or the current year. It also depends on if the gain was self-employed or not. In most cases, if you are a business owner, you will be required to take and pass my CGA exam for me if you wish to register your company with the Canadian authorities and receive CIT deductions for your business expenses.
Individuals and small businesses can greatly benefit from the use of professional tax services. However, you may also find that you need assistance with the various areas of tax law. For example, if you run a business and receive any type of income, you will be required to pay tax on it. My Tax Edge business can help you determine which tax bracket you are in and how much income you may be in a particular tax bracket. By using a combination of comprehensive courses, a comprehensive guidebook, online tutorials and a qualified CPA, you can be on your way to take my exam for me?
