Small Business Tax Advice – The New CFO in Town

Taxes

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Karen PhotoThis is a guest post by Karen Orr a stay at home mom to two beautiful daughters with a (currently underutilized) BA in Business Administration ““ Human Resource Management. She considers herself to be the “geek” in the family and enjoys managing the family business, reading, and volunteering her time to lead a group for other moms.

Taxes ““ it’s that time of year again. I speak from experience that doing my taxes can be a painful experience. Let me tell you how much the pain increases when you start your own business which my husband and I did about five months ago. I tend to have a personality that loves to know how things work”¦and I am also a rule follower (yes, my parents are proud). In preparation for filing our 2009 tax return, including a Schedule C (small business portion of the return necessary if you own your own business), I found myself pouring over the Small Business Administration website and the IRS website. I know, how exciting am I? I feel like I have a very full life taking care of my husband, two daughters, and our home, but I just couldn’t stop soaking up the information. Advice we were getting fro others was to just take all our paperwork to our CPA and let them figure it all out. But, you know, I actually felt empowered to be learning so much. Who is going to know more about our business than my and husband and me, and better yet, who is going to care as much are we do? So, I found myself making spreadsheets, utilizing Quickbooks, printing off schedules and publications, all so we could be better informed when it came time to file. We are fortunate this year that my husband was employed for the first half of 2009 so we are not to the point of owing extra tax for the business.

CPA or Not?

I’ve learned a lot about self-employment tax ““ the tax we owe that makes up the portion of social security and Medicare that is typically withheld by employers ““ and estimate taxes ““ the manner in which we pay our self-employment tax and federal tax because it’s owed in a pay-as-you-go tax. If you do not have anyone withholding the right amount of federal tax, such as an employer, than you are subject to making estimated tax payments. It has also been helpful to discover all the things that count as deductions and how to determine our profit from the company. Now, I’m not discouraging anyone from seeking help from a CPA. In fact, I did sit down with our CPA about a month ago just to make sure I was on the right track. I had such a sense of accomplishment when I was able to follow what she was saying, and it was helpful to be guided towards a few things to look out for that I might not have known otherwise. For us, I was successful in utilizing TurboTax for Home and Business to file our return. I feel like TurboTax also pointed out to me many things I might have overlooked. I kind of view TurboTax as my own personal CPA but without the expense. I guess that’s the point though, right? TurboTax wouldn’t be successful if it didn’t help small business owners like us figure out all the ups and downs of filing our taxes.

Here are a few of our findings:

  • Small business owners can deduct the full amount of the insurance premiums paid for health insurance
  • We bought a laptop to use for our business and we can utilize a depreciation deduction for the next 5 years.
  • Our business is a handyman business and all the tools my husband bought to get started were expenses which reduced our taxable income.

I would not necessarily call this post a review of Turbo Tax for Home and Business but I would definitely recommend it to small business owners. I was pleased with the ease with which it pointed me in the right direction and basically give myself a huge pat on the back for successfully figuring it all out. My husband is super happy too, and since he makes a wonderful CEO/handyman, that leaves the position of CFO open for me!

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