Taxes! Not only do people resent having to pay them, but the whole process can be complicated. There are ways to save money at tax time, but many small business owners become so confused by the explanations that they just do the bare minimum. That’s why it’s always a good idea for small business owners to have their taxes done by their accountant, but it’s also worth explaining to them the basics of how they can save money – for example, through depreciation.
Itâ€™s important that a business claims the maximum tax advantage from depreciation. Itâ€™s a bit like claiming expenses, only youâ€™re claiming just the depreciation amount, not the total cost of the asset. But thereâ€™s more to depreciation than just a tax claim, and business owners should know how to calculate it as well.
Talk them through straight line and declining balance depreciation, and keep it simple enough so they grasp the concept. Emphasize the importance of record keeping. In order to be able to show depreciation of assets, they need to keep proof of purchase, the depreciation claimed, the adjusted tax value of each asset and the tax invoice.
The IRS website has a good section on depreciation that’s well worth your small business owners checking out.