WARREN, Ohio – Should you take a large business deduction as a lump sum or stretch it out over the next year or longer as your small business grows?
The owners of small businesses leave a lot of money behind, and Barb Cibella, owner of Black Cat Tax in Champion, says she looks at three years of back tax returns and makes suggestions that business owners should consider.
Cibella, an enrolled agent who has experience working with the Internal Revenue Service and business owners on taxes, spoke Aug. 15 at The Chophouse in Warren as part of the 717 Credit Union Business Accelerator program.
From accounting software for small businesses to suggestions on when to make large purchases for deductions, Cibella offered a wide range of advice.
One sign that it may be time to progress from a sole proprietorship to an S corporation could be the amount of money a business earns after expenses. Those clearing $40,000 to $45,000 should consider transitioning, Cibella says, which means petitioning the IRS to change designations. This could save the business owner from paying self-employment taxes as he would now be paid as an employee.
Cibella says buying large equipment is best done in the first three quarters of the year if the business intends to take depreciation tax deductions.
She also suggests using a logbook or an app for tracking mileage, which will hold up during an audit.
The IRS sometimes runs more than two years behind on audits. So business owners should scan or take pictures of receipts, she adds. With exposure to air, the printing on many receipts fades.
Cibella also suggests using one credit card for the business, which makes it easier to keep track of expenses.
Although the IRS can be difficult to deal with, the state of Ohio can be worse, charging penalties and interest for those not keeping up with sales tax and other filings, she says.
“You’ve got to be diligent on keeping up on your end of the deal,” Cibella says of business filings with the state.
Cibella noted the importance of filing taxes as a business grows or builds, even if it is not yet making a profit.
She reminded business owners, many of whom may have one or more limited liability corporations in their name, that nearly all LLCs must file beneficial ownership information, a new requirement. Cibella says the business owner’s address on their driver’s license must match the LLC’s address, even if the owner is renting space elsewhere for the business to operate.
At the event, Tanisha Wheeler, regional director of the Minority Business Assistance Center at the Youngstown Business Incubator, introduced the services that MBAC offers.
The 717 Credit Union Business Accelerator program is a free series. The first event, held in July, provided information about using e-commerce.
Upcoming topics include:
• Finding & Hiring Great Employees: Noon to 1 p.m. Aug. 27 (webinar).
• Contractor’s Workshop: 5:30 to 7:30 p.m. Sept. 17 at Brite Energy Innovators, 125 W. Market St., Warren.
• Business Law Basics: 11:30 a.m. to 1 p.m. Sept. 19 at The Magic Tree, 7463 South Ave.
• Business Marketing Bootcamp: 11:30 a.m. to 1 p.m. Oct. 9 at The Chophouse, 9519 E. Market St., Warren.