With running a business we all hope to have as little expenses as possible. However, when it comes to tax returns, expenses help. If you aren’t reporting business expenses, you’re being taxed on total income earned from your business. If you report expenses, you are only taxed on the net income.
Net income is:
Income – Expenses = Net Income
Net income is used to determines the amount you will owe in employment tax as well as income tax.
It is important to keep track all your income and expenses from your business. I recommend using accounting software because it can also help with the amount of taxes you owe. If you’re not into doing it yourself, contact me to do it for you.