Taxes are complicated, and they’re much more so for small-business owners and freelancers. Those who work part-time — especially now, as filers consider the tax consequences of small-business assistance programs and rule changes.
Small business owners must update their taxes
Most small businesses start as sole proprietorships, which means they’re run entirely by themselves and aren’t incorporated. Even though the small business tax code didn’t change much this year, several tax credits, loan programs, and acts were created to help businesses deal with the effects of COVID-19. As a result, a small business owner must keep up with the latest tax rules to pay the correct amount each year, Turbotax posted.
According to three tax experts, fresh twists and turns can lead to tax savings. According to them, there are seven things that enterprises and self-employed people may do this filing season and in the coming year to reduce their tax costs and anxiety.
Experts tips to save on taxes in 2022
First, if your company obtained a loan under the Paycheck Protection Program or PPP, and you were eligible for forgiveness, the money isn’t counted as part of your gross income by the IRS.
Second, if the food and beverages are from a restaurant, the business meals deduction will increase from 50% to 100% in 2021 and 2022.
Third, if you’re a self-employed person, you can deduct every mile you travel from your taxable income for business purposes. The cost was 56 cents per mile in 2021, and it increased to 58.5 cents per mile in 2022. It means that a 20-mile trip to meet a client could be worth around $12 in this year’s tax return.
Fourth, you can get a tax advantage on your retirement funds if you work for yourself. For example, one-participant 401(k)s, also known as solo 401(k)s, are a type of self-employed retirement account tax-favored by the IRS. They have many of the same benefits as a 401(k) plan sponsored by your company, such as the ability to save money before taxes.
Finally, while the home office deduction is a popular way to save money on rent, utilities, and other home-related expenses, a home office can also help you save money on other taxes. According to Sean DiMercurio, a certified public accountant of DiMercurio Advisors in Orlando, Florida, if you purchased an old table, computer, or chair for your home office in 2021 and haven’t already claimed it as a business cost, you may be eligible to deduct its current market value, SFGate wrote.
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