Introduction 1 About This Book 1 Foolish Assumptions 2 Icons Used in This Book 3 Beyond the Book 3 Where to Go from Here 4 Part 1: Understanding Small Business Taxes 5 Chapter 1: Small Business Taxes 101 7 Valuing Year-Round Tax Planning 8 Factoring taxes into small business decisions 8 Checking out common tax mistakes 9 Noting How Corporate and Individual Tax Reform Impacts Small Business 12 Checking out corporate income tax rate reduction and simplification 12 Reducing individual income tax rates 13 Noting 20 percent deduction for pass-through entities 13 Enjoying better equipment expensing rules 14 Increasing maximum depreciation deduction for automobiles 15 Limiting interest deductions 15 Reducing meal and entertainment deductions 15 Eliminating the health insurance mandate 16 Revising rules for using net operating losses 16 Considering the SECURE ACT of 2019 and COViD-19 Relief Tax Acts 16 Contemplating Potential Upcoming Tax Law Changes 17 Understanding the Different Types of Taxes You Pay and Your Tax Rates 18 Defining total taxes and taxable income 19 Your marginal income tax rate for federal income taxes 19 State income taxes 21 Corporate income tax rates 22 Employment (payroll) taxes 23 Sales taxes 24 Chapter 2: Making Important Business Decisions 25 Choosing Your Business Entity 26 Sole proprietorships 26 Deciding whether to incorporate 28 One step further: S corporations 35 Partnerships 37 Limited liability companies (LLCs) 38 Valuing Employee Benefits 39 Retirement plans 40 Health insurance plans 41 Other benefits 45 Benefits that are deductible for corporation owners 46 Chapter 3: Retirement Accounts and Investments for Small Businesses 47 Beginning with Retirement Account Basics: Tax Breaks, Penalties, and Saving Guidelines 48 Instant rewards: Upfront tax breaks 48 Ongoing tax breaks on your investment earnings 49 Additional tax credits for lower-income earners 49 Retirement account penalties for early withdrawals 50 Guidelines for saving (but not excessively) 51 Surveying Your Retirement Account Options 52 Maximizing your retirement plan''s value 53 Checking out your choices 54 Developing Realistic Investment Return Expectations 57 Estimating your investments'' likely future returns 57 Compounding your returns 59 Selecting Top-Notch Investments for Your Retirement Account 61 Considering fund advantages 61 Maximizing your chances for fund investing success 63 Understanding and using index funds 65 Considering exchange-traded funds 66 Using asset allocation in your retirement fund portfolio 67 Selecting the best stock funds 69 Investing in the best exchange-traded funds 71 Balancing your act: Funds that combine stocks and bonds 72 Finding the best bond funds 73 Chapter 4: Real Estate and Your Small Business 77 Deciding Whether to Work out of Your Home 78 Researching local ordinances and issues 78 Controlling costs 80 Separating your work life from your personal life 81 Doing a cost comparison 82 Leasing Space for Your Business 82 Leaning toward leasing 82 Leasing burdens of retail businesses 83 Negotiating a lease 83 Buying Business Property 85 Taking stock of your financial situation 85 Doing a rent-versus-buy analysis 86 Evaluating leases as a real estate investor 86 Chapter 5: Estate Planning 91 Determining Your Estate''s Tax Concerns 92 Understanding the federal estate tax exemption 92 Figuring out your taxable estate 93 Examining federal estate tax rates 93 Surveying state estate tax rules 93 Surveying special estate tax treatment afforded small businesses 95 Reducing Expected Estate Taxes with a Few Strategies 95 Giving away your assets 97 Leaving all your assets to your spouse 99 Buying cash-value life insurance 99 Setting up trusts 102 Getting advice and help 103 Part 2: Ongoing Tax Jobs 105 Chapter 6: Keeping Track of Your Small Business Revenues and Costs 107 Establishing an Accounting System for Your Business 108 Separating business from personal finances 108 Documenting expenses and income in the event of an audit 109 Keeping current on income, employment/payroll and sales taxes 110 Reducing your taxes by legally shifting income and expenses 111 Keeping Good Tax Records for Your Small Business 112 Ensuring a complete and accurate tax return 112 Setting up a record-keeping system 113 Deciding when to stash and when to trash 114 Watching out for state differences 115 Replacing lost business records 115 Chapter 7: Form 1040 Filing Options 117 Sizing Up the New and Improved Form 1040 117 Tackling the Income Lines 119 Line 1: Wages, salaries, tips, and so forth 120 Line 2a: Tax-exempt interest 121 Line 2b: Taxable interest 121 Lines 3a and 3b: Qualified dividends and ordinary dividends 122 Lines 4a and 4b: IRA distributions and taxable amount 122 Lines 5a and 5b: Total pensions and annuities 122 Lines 6a and 6b: Social Security benefits 123 Line 7: Capital gain (or loss) 124 Line 8: Other income from Schedule 1, line 9 124 Line 11: Adjusted gross income 124 Line 12a: Standard deduction or itemized deductions (from Schedule A) 124 Line 13: Qualified business income deduction 125 Schedule 1: Additional Income and Adjustments to Income 126 Line 3: Business income (or loss) 127 Line 4: Other gains (or losses) 128 Line 5: Rental real estate, royalties, partnerships, S corporations, trusts, and so on 128 Line 6: Farm income (or loss) 129 Line 7: Unemployment compensation 129 Line 8: Other income 129 Adjustments to Income 131 Line 11: Educator expenses 131 Line 12: Certain business expenses of reservists, performing artists,and some government officials 32 Line 13: Health savings account deduction 132 Line 15: Deductible part of self-employment tax 133 Line 16: Self-employed SEP, SIMPLE, and qualified plans 134 Line 17: Self-employed health insurance deduction 134 Line 20: IRA deduction 135 Line 21: Student loan interest deduction 135 Nonrefundable Credits: Schedule 3 137 Line 1: Foreign tax credit 138 Line 2: Credit for child and dependent care expenses 138 Line 3: Education credits 139 Line 4: Retirement savings contributions credit 140 Chapter 8: Schedule C: Profit or Loss From Business 141 Detailing Schedule C 142 Getting the Basics Down 143 Accounting methods 144 Material participation 146 Part I: Income 147 Line 1: Gross receipts or sales 147 Line 2: Returns and allowances 147 Line 4: Cost of goods sold 147 Line 6: Other income 148 Part II: Expenses 149 Line 8: Advertising 149 Line 9: Car and truck expenses 149 Line 10: Commissions and fees 152 Line 11: Contract labor 152 Line 12: Depletion 153 Line 13: Depreciation 153 Line 14: Employee benefit programs 155 Line 15: Insurance (other than health) 155 Line 16a: Mortgage interest 155 Line 16b: Other interest 155 Line 17: Legal and professional services 156 Line 18: Office expense 156 Line 19: Pension and profit-sharing plans 156 Lines 20a and b: Rent or lease 156 Line 21: Repairs and maintenance 157 Line 22: Supplies 157 Line 23: Taxes and licenses 158 Lines 24a and b: Travel and meals 158 Line 25: Utilities 159 Line 26: Wages 159 Line 27: Other expenses 159 Line 30: Form 8829 159 Lines 32a and b: At-risk rules 160 Chapter 9: The Business Use of Your Home 163 Checking Out the New, Simplified Home Office Deduction 164 Filling Out Form 8829 166 Recognizing who can use Form 8829 167 Measuring the part of your home used for business 168 Figuring your allowable home office deduction 168 Determining your home office''s depreciation allowance 169 Carrying over what''s left 171 Understanding the Downsides to Home Office Deductions 172 Audit risk and rejection of repeated business losses 172 Depreciation recapture when selling a home with previous home office deductions 173 Chapter 10: Estimated Taxes, Self-Employment Taxes, and Other Common Forms 175 Form 1040-ES: Estimated Tax for Individuals 176 Comparing the safe harbor method to the 90 percent rule 176 Completing and filing your Form 1040-ES 177 Paying estimated taxes on or through the IRS website 179 Keeping Current on Your Employees'' (and Your Own) Tax Withholding 180 Form W-4 for employee withholding 180 Tax withholding and filings for employees 181 Schedule SE: Self-Employment Tax 183 Form 8889: Health Savings Accounts (HSAs) 185 Understanding how HSAs work and who can use them 186 Completing Form 8889 187 Part 3: Getting Help 189 Chapter 11: Dealing with Notices and Audits 191 Understanding the Basics You''ll Find on an IRS Notice 192 Assessing Assessment Notices 193 Income verification and.