Whether you operate a physical store or engage in multistate e-commerce activities, it's important to understand your sales tax obligations. Optimally, you'll acquaint yourself with sales tax rules and laws impacting your business before launch to ensure you avoid compliance issues.

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How to Pay Sales Tax for Small Business: A Guide

<a href="https://1800accountant.com/blog/accountant-help-small-business-growth">It's not uncommon for solopreneurs, gig workers, and small business owners</a> to use their personal cell phones for business functions. Smartphones can handle client communications, email, scheduling, and bookkeeping, among other essential tasks, all in the palm of their hands.If you've been using your phone for business purposes, you're probably wondering: What can I legally claim on my taxes if I use my personal phone for work? As long as you meet IRS criteria and maintain supporting documentation, you can deduct the portion of your smartphone costs associated with business use. But how?By following this essential guide, you can keep more of your hard-earned money while ensuring peace of mind. It breaks down exactly what you can claim, <a href="https://1800accountant.com/blog/quarterly-estimated-taxes">how to calculate your deductions</a>, and how to remain IRS-compliant as you build your business.&nbsp;<h2>Who Can Claim Personal Phone Usage, and What Can You Deduct?</h2>Not everyone who works is eligible to deduct cellphone expenses from their cellphone bill, but if you're self-employed or run a small business then chances are you qualify. You may be able to deduct both direct and indirect cellphone expenses as long as you can demonstrate business use.<h3>Figuring Out What’s for Work</h3>To claim a deduction, you must determine how much of your cellphone usage is work-related versus personal use. Business calls, texts, emails, apps (like Slack or Zoom), and data used to run your company all count as business use.&nbsp;Tracking your business usage with a log or digital tool is essential to determining the amount you can deduct. If you find that you use your phone 60% of the time for business, you can claim 60% of your phone expenses.<h3>Are You an Employee or Self-Employed?</h3>You can deduct eligible phone costs on your <a href="https://1800accountant.com/blog/self-employment-tax-2">Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship) if you're self-employed</a> or run a small business LLC. However, this is not an option if you're a W-2 employee. Since the 2017 Tax Cuts and Jobs Act (TCJA), employees can no longer deduct unreimbursed job expenses—including cellphone costs—from their federal taxes.While employees can no longer deduct cell phone reimbursements, they can still accept them. If your employer reimburses part of your phone bill, make sure it’s properly accounted for to avoid duplicate claims or flags that may invite unwanted attention from the IRS..<h2>What Can You Deduct?</h2>Now that you've established your eligibility, it's time to identify specific expenses that you can deduct on your tax return.&nbsp;<h3>What’s a Direct Expense?</h3>These are costs tied directly to your monthly cell phone use for business, including:<ul><li>Service charges</li><li>Data plans</li><li>Business-only app subscriptions</li><li>International calling fees for client work</li></ul>Remember—you can only deduct the portion of your phone used for business reasons. For example, if your bill is $100/month and you use it 70% for business, you can deduct $70 from your monthly bill.<h3>Phones and Fixes</h3>If you upgraded to a new smartphone this year or plan to, you may be able to deduct part of the cost or depreciate it over several years. The IRS lets you recover the cost of business assets through depreciation if the asset has more than one year of useful life.&nbsp;If you have yet to upgrade, but have repair costs associated with common issues like a cracked screen or battery replacement, and the phone is partially used for business, a portion of the repair cost is deductible, too. You can avoid or reduce smartphone damage via a screen protector or phone case, <a href="https://www.thestreet.com/taxes/can-cellphone-expenses-be-tax-deductible-with-a-business" target="_blank">which are also tax-deductible</a>.<h2>How to Calculate and Keep Track of Deductions</h2>Calculating each deduction is one of the more time-consuming and challenging aspects of reducing your tax liability. <a href="https://1800accountant.com/blog/maximize-small-business-tax-deductions">Follow this guide to maximize your tax savings</a>.&nbsp;<h3>How Much is for Business?</h3>Use your phone's screen time feature or a usage log to determine how much of your activity is business-related. You can also analyze your mobile phone bill and highlight business numbers from personal calls.We recommend retaining documentation for at least three months to establish a reliable pattern of business use.<h3>Different Ways to Calculate</h3><a href="https://1800accountant.com/blog/small-business-tax-deductions-checklist">There are two main ways to calculate deductions</a> related to business use:<ul><li>Actual Expense Method: Track the exact portion of your phone bill and phone costs related to business use.</li><li>Simplified Method: Estimate business use as a percentage and apply it to your total phone costs. This works best for solopreneurs with consistent usage patterns.</li></ul>If you need help with calculations or determining the optimal method,<a href="https://1800accountant.com/services/small-business-taxes"> 1-800Accountant</a> is ready to assist. Let our experts ensure your deductions are accurate, optimized, and claimed by the appropriate deadline.&nbsp;<h3>Keeping Everything in Order</h3>Good recordkeeping supports your deductions, ensures a smooth tax preparation process, <a href="https://1800accountant.com/blog/audit-without-receipts">and aids in audit defense should you receive a notice</a>. Records you should consider retaining include:&nbsp;<ul><li>Monthly phone bills</li><li>Notes differentiating between business and personal usage</li><li>Receipts for phone purchases and repairs</li><li>Any reimbursement documentation</li></ul>A digital expense tracker or app can streamline this process.<a href="https://1800accountant.com/services/small-business-taxes"> 1-800Accountant’s tech tools</a> and mobile application let you upload receipts and link accounts effortlessly.<h3>Following IRS Rules</h3>Make sure your documentation aligns with IRS expectations for business owners in your state and industry while avoiding common pitfalls like claiming 100% of your bill when you use your phone for personal calls. And don’t forget to properly implement depreciation if you’re deducting part of the phone’s cost.<h2>Real-Life Scenarios and Tax Tips</h2>Refer to the deduction example below that best fits your business classification. Sometimes, the best way to understand deductions is to consider a real-world scenario.<h3>Business Owner Example</h3>Olivia runs a graphic design business. She uses her personal phone for project discussions, client calls, and social media marketing—about 75% of her total usage. Her bill is $120/month.In this scenario, Olivia would <a href="https://turbotax.intuit.com/tax-tips/small-business-taxes/can-cellphone-expenses-be-tax-deductible-with-a-business/L6NQvycMO" target="_blank">determine that $90 of her $120 monthly bill qualifies as a business expense</a>. She then deducts $90/month × 12 = $1,080/year in business expenses.<h3>Consultant Example</h3>Raj is a self-employed consultant who bought a new phone for $1,200, estimating 60% business use. He can depreciate $720 over three years, claiming $240 yearly, plus 60% of his $80/month cell phone plan.&nbsp;<h3>Gig Worker Example</h3><a href="https://1800accountant.com/blog/doordash-tax-deductions">Sam drives for a delivery service and uses his mobile device for navigation</a>, orders, and customer communication. He logs 85% of business use and deducts that portion of his phone expenses using the simplified method.&nbsp;<h3>Employee with Partial Reimbursement</h3>Michelle works remotely and receives a $40/month stipend from her employer to cover work-related phone use employee expenses. Her total bill is $100 per month, and she uses her own device for work 60% of the time. Since she's reimbursed and a W-2 employee, she can't claim additional deductions, but she must account for the reimbursement when reporting her income if it's not classified as a tax-free fringe benefit.<h2>Planning for the Long Haul</h2>Think ahead beyond the current tax season. Tracking and deducting cellphone expenses can be part of a larger, long-term tax strategy—especially if you're scaling your business.Combine your cellphone deductions with other common write-offs (like home office, software, and internet) to reduce your taxable income over time.<a href="https://1800accountant.com/blog/small-business-tax-deductions-checklist"> To get started, browse our small business tax deductions</a> list for ideas and inspiration.<h2>Using Tech to Make Taxes Easier</h2>Incorporating digital tools and technology into your tax planning processes minimizes errors and headaches while saving time during the tax year.&nbsp;&nbsp;<h3>Tech Tools for Tracking Expenses</h3>1-800Accountant's mobile application for major smartphone platforms, Expensify, TurboTax, and QuickBooks, helps you securely track and categorize expenses, scan receipts, and store documentation—all from your phone.<h3>Syncing with Your Accounting Software</h3>Automating the sync between your bank account and bookkeeping software ensures no expense is missed.<a href="https://1800accountant.com/services/bookkeeping"> With 1-800Accountant’s full-service bookkeeping solution</a> for small businesses, you can integrate your data, save time, and prepare for tax season with the peace of mind knowing your financial data is current and error-free.<h2>Handling Tricky Tax Situations From Personal Phone Usage</h2>While addressing common business use scenarios with your personal phone is relatively straightforward with a bit of practice, overcoming edge cases requires more insight and expertise.<h3>Dealing with Different States</h3>Do you travel for work or operate in multiple states? State-specific rules may impact your phone deductions and will likely complicate your tax preparation and filing processes. Keeping a mileage and travel log alongside your phone usage can support more nuanced deductions that apply to multistate operations.<h3>Industry-Specific Tax Issues</h3>Your phone may be a vital business tool if you're in real estate, consulting, construction, or a high-communication field. If appropriately documented, some industries can claim higher percentages of business use.<a href="https://1800accountant.com/services/business-tax-advisory">1-800Accountant’s tax experts</a> can tailor advice to your industry, ensuring you never leave money on the table.<h2>Maximize Your Savings with 1-800Accountant</h2><a href="https://www.hrblock.com/tax-center/filing/adjustments-and-deductions/cell-phone-tax-deduction-requirements/" target="_blank">Solopreneurs, gig workers, independent contractors, and small business owners</a> must make every effort to reduce their taxable income throughout the year. As this article demonstrates, your personal phone can be a valuable business deduction—if you know how to strategically claim eligible deductions. From calculating the right percentage to storing proper documentation, correctly executing each step is essential and helps ensure compliance.Navigating the right deductions for your business operations can be challenging without critical guidance from<a href="https://1800accountant.com/support/contact-us"> 1-800Accountant</a>, America's leading virtual accounting firm. Our CPAs and tax experts understand the nuances of your business cellphone deductions, depreciation, and industry-specific rules, giving you peace of mind and the freedom to focus on your next business milestone.<a href="https://1800accountant.com/support/contact-us">Schedule a call today</a> to maximize your deductions and streamline your tax process, so you can keep more of what you earn.

As long as you meet IRS criteria and maintain supporting documentation, you can deduct the portion of your smartphone costs associated with business use. But how? By following this essential guide, you can keep more of your hard-earned money while ensuring peace of mind.

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If I Use My Personal Phone for Work, What Can I Claim?

The California sales tax system has city, county, and state components that make it incredibly complex, which further emphasizes the need for businesses to grasp applicable sales tax responsibilities. Businesses that operate throughout the state will encounter varying rates, which range from 7.25% to 11.25%, due to the addition of local district taxes.

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Sales Tax in California: Essential Guide for Businesses

Creating a tax strategy that will help achieve your short-term and long-term business goals is essential. Your tax strategy should aim to reduce your business's annual federal and state tax liability efficiently. Tax planning should save time and resources, but it’s generally not just one activity—it can be a combination of different supporting tactics that <a href="https://1800accountant.com/blog/small-business-tax-strategies-to-save-money">will ultimately help you save money</a>.<a href="https://1800accountant.com/blog/tax-strategies-for-startups">Whether you operate as a startup</a>, a sole proprietorship, a partnership, a limited liability company (LLC), an S corporation, or a C corporation, you want to reduce the taxes you owe while ensuring you fulfill your compliance and tax obligations. Use this guide to learn about the seven business tax strategies you should consider that will help you save more money, along with helpful answers to some of small business owners' most frequently asked tax planning questions.&nbsp;&nbsp;<h2>Top 7 Small Business Tax Planning Strategies for Tax Savings</h2><h3>1. Claim your deductions</h3>Use tax deductions to reduce your taxable income. The business taxes you pay will be based on your lowered income amount. Consider taking the following tax deductions to <a href="https://www.forbes.com/councils/forbesfinancecouncil/2025/03/17/the-power-of-strategic-tax-planning-in-driving-business-profitability/" target="_blank">support your small business tax planning strategy</a>.&nbsp;<ul><li>Home Office Deduction. If you’re a homeowner and have a regular and established workplace in your home, the associated costs can be deducted from your taxes.</li><li>Charitable Contributions. Lowering your adjusted gross income (AGI) is a popular strategy for small business tax planning. An easy way to do this is by donating to a charity. Many charities will provide a year-end statement to their regular donors, but keeping track of your giving through itemized deductions is essential.</li><li>Qualified Business Income (QBI) Deduction. The QBI deduction allows a small business owners who operate as a pass-through entity business structure to deduct up to 20% of net business income. This deduction is written into the 2017 Tax Cuts and Jobs Act (TCJA) and may expire if not renewed.&nbsp;</li></ul>A tax advisor can help determine your business expense’s eligibility and offer tactics to write off startup costs and half of your 15.3% self-employment tax while managing end-of-the-year federal tax considerations. Learn more in our blog,<a href="https://1800accountant.com/blog/maximize-small-business-tax-deductions"> 7 Tips to Maximize Deductions and Credits in 2024</a>.&nbsp;<h3>2. Use your tax credits</h3><a href="https://1800accountant.com/blog/business-taxes">A tax credit will either reduce the amount of taxes you owe</a> or increase your tax refund from your tax return. Consider taking the following tax credits to support your small business tax planning strategy, and learn more about additional tax credits your business may be eligible for in the blog above.<ul><li>Earned Income Tax Credit (EITC). This is one of the better-known tax credits that can apply to individuals with low or moderate incomes.</li><li>Small Business Health Insurance Premiums. Small business owners with fewer than 25 employees who pay at least 50% of employee premium costs qualify for this credit.</li><li>Work Opportunity Credit. If you employ individuals from qualifying groups who have faced significant barriers to employment, you may be eligible for this work opportunity credit.</li></ul><h3>3. Consider your entity structure</h3><a href="https://1800accountant.com/blog/entity-right-business">A foundational element of business tax planning is verifying your business entity structure</a>.Businesses come in all shapes and sizes, offering different benefits and disadvantages. An LLC provides more flexibility in its operations, with personal asset protection and pass-through taxation as popular features. When a business entity, including a sole proprietor running a sole proprietorship, a partnership, and an S corporation, features pass-through taxation, income is not taxed at the level of the business or corporation. Instead, it is passed through to be taxed at each owner's individual taxpayer level.Although your business is already registered as one entity type, a change may be worth considering. For example, once you form an LLC, you have 75 days to select a different business structure for your new company, such as a C corporation.<a href="https://1800accountant.com/blog/converting-llc-to-c-corp">Learn about the three tax consequences you should consider in our blog</a> if you are thinking about converting from an LLC to a C Corp this tax season or next year.&nbsp;<h3>4. Defer or accelerate income</h3>Deferring your small business income and accelerating deductions is an excellent tax planning tax-saving strategy. When you defer your business income, shifting it from one tax year to the next, you can potentially lower your tax bracket and overall tax liability. This shift to a lower tax bracket may qualify you for deductions unavailable to businesses in higher brackets.The tax deductions your business qualifies for will lower your tax liability further, minimizing the amount you will pay to the IRS and accelerating your income.<h3>5. Set up retirement plans</h3>Even if it seems like a long way off, saving now will help you build a nest egg that ensures a comfortable retirement. As you consider a retirement plan, keep your employees in mind, as retirement contributions are a benefit and a means to retain talent.Consider offering your employees a retirement plan, which can provide additional tax benefits by lowering your taxable income. Small business owners can offer a 401(k) plan or a simplified employee pension (SEP) plan. It’s important to note that your employees are not required to contribute to a retirement plan. They may instead choose to save for retirement through a Roth IRA, which cannot be deducted from their taxes.Saving for retirement is another excellent tax planning tactic for small businesses. It can help them save money and better understand their tax bills.<h3>6. Offer employee benefits</h3>Aside from increased wages, the best employees gravitate to employers offering great benefits and other incentives. These can be healthcare-related benefits such as:<ul><li>Health insurance</li><li>Dental insurance</li><li>Reimbursement (transportation, tuition, or federal student loan payments)</li></ul>While no new laws governing employee benefits have passed recently, state and federal discussions about healthcare, telehealth, and expanded family leave exist. While businesses throughout America monitor legislative development impacting employee benefits, many employers are embracing quality of life and financial wellness benefits in the current year.&nbsp;<h3>7. Sell a losing investment</h3>“When life hands you lemons, make lemonade.” Addressing a poor investment and bad debts may be challenging, but it can be used to your advantage for business purposes when planning your tax strategy and navigating tax laws. If you decide to sell a losing investment, you can categorize this as negative income or a capital loss. This tactic can lower your income and reduce your tax burden.<a href="https://1800accountant.com/blog/filing-taxes-for-small-business-with-no-income">The maximum amount for a capital loss in 2025 is $3,000</a>. Any amount over that can be applied to the following year.<h2>Tax Planning FAQ for Small Business Owners</h2>Do I need to hire a small business tax planner? You can attempt to plan your tax strategy yourself,&nbsp; but you might not get consistently great results as you would working with a tax planning professional. <a href="https://1800accountant.com/blog/cost-of-tax-preparation-by-cpa-for-small-business">Partnering with a certified public accountant (CPA)</a> ensures you get quality service from a qualified expert committed to maximizing your business's tax savings.What are the disadvantages of tax planning? The main drawback of tax planning is the time and effort needed to optimize your savings. You may need to change your business operations as you implement these strategies. Small business tax planning doesn’t guarantee huge savings, and some business owners may want to focus on other aspects of their operations.How much does tax planning cost? <a href="https://1800accountant.com/blog/how-much-does-a-small-business-pay-in-taxes">The cost of tax planning services varies</a> based on your business’s intricacies, such as the number of employees or the range of deductions that may be involved.<a href="https://1800accountant.com/pricing"> Browse our standard packages and pricing here</a>, and contact us if you require a package customized to address your unique business needs.Are there any tax planning scams to be aware of? Most tax advice focuses on deductions and ways to save money, but it’s also important to be aware of the various tax scams that may impact your business. Scammers are devoted to deceiving taxpayers, often by impersonating the IRS and demanding immediate payment. The IRS will never call, text, or email an individual and request payment or personal information. When in doubt, contacting the IRS directly through their website is best to verify the legitimate notifications you receive.<h2>Maximize Your Savings and Business Profitability with Expert Tax Strategy</h2>An expert tax strategy has numerous benefits, which include boosting business profitability beyond valuable deductions and credits. If handling your small business tax planning has distracted you from your core business operations, the tax professionals at 1-800Accountant, America's leading virtual accounting firm, can help.Save time and achieve your annual financial goals with our suite of affordable, tax-deductible financial services. Schedule a quick consultation–usually 30 minutes or less—to learn how<a href="https://1800accountant.com/services/bookkeeping"> bookkeeping</a>,<a href="https://1800accountant.com/services/business-tax-advisory"> tax advisory</a>, and<a href="https://1800accountant.com/services/income-taxes"> personal income tax preparation and tax filing</a> will help you maintain full IRS compliance with maximum tax savings.

Your tax strategy should aim to reduce your business's annual federal and state tax liability efficiently. Tax planning should save time and resources, but it’s generally not just one activity—it can be a combination of different supporting tactics that will ultimately help you save money.

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Business Tax Planning Guide: 7 Strategies That Can Help You Save More

If your small business has yet to embrace tax loopholes, you're not alone. Use this great blog to learn what to know about tax loopholes for your small business, how you may benefit, and other strategies to reduce what you pay to government authorities.

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Tax Loopholes for Small Businesses: What to Know

Rental property management for a single vacation or short-term rental property can be a breeze when compared to the complexities of owning a portfolio of rental residences. How rental property owners and entrepreneurs are taxed is impacted when they own property in different states, how each property is classified based on usage, and how that income is routed.Whether you're considering acquiring a new property or have been grappling with multi-property ownership tax issues for some time, we understand your concerns. You're not alone. Many people and businesses successfully address similar tax challenges regularly.<a href="https://www.forbes.com/councils/forbesfinancecouncil/2024/11/01/why-short-term-rentals-can-still-be-good-investment-strategies/" target="_blank">Use this article to learn how vacation and short-term rentals are classified</a>, bookkeeping challenges and essentials, your tax obligations, and other considerations to help ensure compliance and increase short-term rental profits.&nbsp;<h2>Defining Vacation and Short-Term Rentals</h2>A guest’s average time renting a property will define its rental category.&nbsp;&nbsp;<ul><li>Short-term rental. This type of rental lasts 30 days or less and is usually associated with vacation, Airbnb, and VRBO-style platforms.&nbsp;</li><li>Medium-term rental. This type of rental lasts from 1 to 6 months. Typical renters include a business professional in town for a temporary work assignment or a college student studying during the semester.&nbsp;</li><li>Long-term rental. This type of rental can last 6 months to a year or longer and includes more traditional lease agreements for apartments and other dwellings.&nbsp;</li></ul>Income you generate with little effort, such as rent collection, is considered "passive." In contrast, income from more demanding work, such as playing a more substantial role in your rental operations, is considered "non-passive." Your passive and non-passive income from short-term rentals may be deductible on your tax return.You can deduct passive income losses against your passive income and non-passive income against non-passive income. You cannot deduct passive income losses against your non-passive income and vice versa.&nbsp;<h2>Short-Term Rental Bookkeeping: Common Challenges</h2>Graduating from a simple spreadsheet to more formal rental bookkeeping integrations is great for tax reporting but not without its challenges for vacation rental owners. Part of the functionality of bookkeeping supports financial reporting and accounting processes by tracking owner statements, financial statements, financial transactions, and refunds. This leads to more efficient financial management and categorizing.<h3>Fluctuating rental income</h3>Because short-term rental properties are impacted by seasonality and demand, pricing and rental income will fluctuate throughout the year.Tracking fluctuating rental income as part of your bookkeeping activities is more complex than businesses with more consistent income, but it's not impossible. Maintaining your books is a time-consuming, detail-heavy process, but it effectively empowers you to manage finances, such as cash flow. Ensure you're accounting for market fluctuations as you record your fluctuating short-term rental income and spread out rental income throughout the year to compensate for lean financial periods.&nbsp;<h3>Revenue collection through rental platforms (e.g. Airbnb)</h3><a href="https://1800accountant.com/blog/airbnb-income-tax">Airbnb charges a 20% service fee to cover their costs for products</a>, services, and support. Airbnb automatically withholds these fees from your payouts, which are typically released 24 hours after an experience.Airbnb and its fees can impact your books if not recorded properly, leading to an inaccurate view of profits and cash flow. Avoid this common challenge by regularly checking your bank <a href="https://1800accountant.com/blog/airbnb-llc-tax-benefits">statements against profits you've made from Airbnb and other platforms</a>.&nbsp;<h3>Independent contractors vs. employees</h3>If you don't use employees, record personnel expenses for the independent contractors you hire to maintain and clean your properties. They may be classified as:&nbsp;<ul><li>Management fees for your property&nbsp;</li><li>Cleaning fees</li><li>Repair and maintenance</li></ul><h2>Vacation Rental Bookkeeping Essentials</h2><h3>Separate, dedicated bank accounts</h3>Opening a business bank account for your short-term rental business can save you hours each month and dramatically streamline and improve your tax return preparation activities without the need to automate.Maintain a separate checking account for your business income and expenses to monitor earnings and spending easily, and you won’t need to scramble for receipts during tax season.<h3>Differentiated tangible and intangible assets</h3>Differentiating between tangible and intangible assets you possess promotes bookkeeping efficiency. An example of a tangible asset is your short-term rental property. In contrast, an example of an intangible asset is the business bank account you created to separate from your personal assets.&nbsp;<h3>Separating personal and rental use</h3>If your property is used as a rental and for personal purposes, you track separate expenses, receipts, and other bills. This will promote efficiency and aid in a smooth tax preparation process.&nbsp;&nbsp;<h3>Tracking and claiming deductibles</h3>Your short-term rental operational expenses are costs you incur when renters and guests stay at your property. You can deduct the vacation rental business-related portion of <a href="https://1800accountant.com/blog/airbnb-tax-deduction">your expenses. Tax deductions to consider include</a>:&nbsp;<ul><li>Repairs</li><li>Maintenance</li><li>Supplies&nbsp;</li><li>Furniture&nbsp;</li></ul><h3>Expense tracking</h3>Track expenses by keeping receipts and logs each time a guest uses your short-term rental property. Tracking these expenses will support the eligible tax deductions related to your rental property.&nbsp; <a href="https://1800accountant.com/blog/most-overlooked-tax-breaks-deductions-retirees">A tax deduction is used to reduce your taxable income</a>. You’ll then pay taxes on this lowered income amount.<h3>Payroll for full-time and contract workers</h3>Use your bookkeeping platform (such as Quickbooks, Xero, or Quickbooks Online), accounting software, or vacation rental accounting software to track payroll for full-time and contract workers, including income tracking, hourly wages, and other pertinent payments as part of your management system.<h2>Tax Obligations for Vacation and Short-Term Rentals: The Variables</h2><h3>Self-employment taxes</h3>Use the records you've tracked throughout the year and other supporting documentation to prepare and file your business tax return. Forms you may use to file your taxes and claim tax deductions include:&nbsp;<h4>IRS Form 1040</h4>Individual taxpayers file IRS Form 1040, U.S. Individual Income Tax Return. Form 1040 calculates your federal taxable income and tax liability.&nbsp;You should also file schedules to report self-employment income: Form 1040 Schedules C and E.<h4>Form 1040, Schedule C</h4>To report business income and expenses, file IRS Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship). Schedule C calculates your business income or loss and is typically used when you provide substantial services (regular cleaning, laundry, etc.) for your short-term rental property.&nbsp;<h4>Form 1040, Schedule E</h4><a href="https://1800accountant.com/blog/1031-exchange-real-estate-tax-benefits">Report income or losses from rental real estate</a>, royalties, partnerships, S corporations, estates, trusts, and residual interests in real estate mortgage investment conduits by using Schedule E (Form 1040), Supplemental Income and Loss.<h4>Form 1040, Schedule SE</h4>You must also pay the 15.3% self-employment tax on your self-employed income. Sole proprietors must calculate self-employment tax liability using IRS Schedule SE (Form 1040), Self-Employment Tax. You can claim half of what you paid in self-employment taxes as a deduction.&nbsp;&nbsp;<h4>Quarterly Estimated Taxes</h4>Self-employed individuals must also estimate and pay quarterly estimated taxes throughout the year. Quarterly estimated tax payment due dates for the 2025 tax year include:&nbsp;<ul><li>April 15</li><li>June 16</li><li>September 15</li><li>January 15, 2026</li></ul><h4>Form 1040, Schedule ES</h4>Use IRS Form 1040-ES, Estimated Taxes for Individuals, to calculate and pay your quarterly estimated taxes. The form includes tax information such as payment vouchers and instructions for filing online.<h3>Substantial services</h3>While the typical landlord isn't expected to provide substantial services to tenants, <a href="https://1800accountant.com/blog/lower-capital-gains-taxes-rental-property">it's more common among short-term rental property owners</a>. Substantial services you may provide to short-term rental guests include:&nbsp;<ul><li>Regular cleaning of the rental unit&nbsp;</li><li>Changing linens and sheets</li><li>Ongoing maid service</li></ul>Report these expenses and your rental income on Schedule C.&nbsp;<h3>Insubstantial services</h3>Not everything you provide is considered a substantial service. Examples of services not considered to be "substantial" include:&nbsp;<ul><li>Trash and recycling collection&nbsp;</li><li>The furnishing of lighting and heating</li><li>Cleaning of public areas</li></ul>Expenses tied to insubstantial services, such as paying for repairs in a public area, can be deducted as rental property expenses on Schedule E.&nbsp;<h3>Material participation</h3>If you were involved in your short-term rental business's operations continuously, regularly, and substantially throughout the year, that activity is usually considered material participation. Generally, a business activity isn't considered passive if you've materially participated.<a href="https://www.irs.gov/publications/p925#en_US_2024_publink1000104582" target="_blank">The IRS created a series of material participation tests</a> (you must satisfy one or more) to determine if you materially participated.&nbsp;<ul><li>You participated in the activity for more than 500 hours.</li><li>Your participation was substantially all the participation in the activity of all individuals for the tax year, including the participation of individuals who did not own any interest in the activity.</li><li>You participated in the activity for more than 100 hours during the tax year and at least as much as any other individual, including those who didn’t have any interest in the activity, for the year.</li><li>The activity is a significant participation activity, and you participated in all significant participation activities combined for more than 500 hours. A significant participation activity is any trade or business activity in which you participated for more than 100 hours during the year and didn’t materially participate under any material participation tests other than this.&nbsp;</li><li>Other than by meeting this test, you materially participated in the activity for any 5 of the 10 immediately preceding tax years, whether consecutive or not.</li><li>The activity is a personal service activity in which you materially participated for any 3 (whether or not consecutive) preceding tax years. An activity is a personal service activity if it involves personal services in health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, or any other trade or business in which capital isn’t a material income-producing factor.</li><li>Based on all the facts and circumstances, you participated in the activity regularly, continuously, and substantially during the year.</li></ul>Note that you didn’t materially participate in the activity under the final test if you participated in the activity for 100 hours or less. Your participation in managing the activity doesn’t count in determining whether you materially participated under this test if:<ul><li>Any person other than you received compensation for managing the activity.&nbsp;</li><li>Or if any individual spent more hours managing the activity during the tax year than you did, regardless of compensation.&nbsp;</li></ul><h3>Personal use of property</h3>Short-term rental owners who stay in their property for at least 14 days (or 10% of the total rental days) must track the number of rental versus personal use days. It's a best practice to review your personal use days annually. Additional rules apply to homeowners renting a room or section of their primary residence.Note that homeowners who use their vacation rental property and have fewer than 15 days of vacation rentals during the tax year <a href="https://1800accountant.com/blog/5-great-things-know-rental-income-taxes">should not report any rental income or expenses</a>.<h2>Get Expert Help: Done-For-You Vacation Rental Accounting with 1-800Accountant</h2>While this guide will point short-term rental property owners in the right direction, it barely scratches the surface. Ensuring compliance and fully maximizing your rental property deductions while navigating confusing rules should be left to the experts, which is why short-term rental property owners and entrepreneurs trust accounting from the experts at 1-800Accountant, America's leading virtual accounting firm, as their accounting solution for their <a href="https://1800accountant.com/blog/real-estate-accounting-guide">complex real estate tax work</a>.&nbsp;Save time and achieve your annual real estate financial goals with our suite of affordable, tax-deductible financial services. Schedule a quick consultation–usually 30 minutes or less—to learn how <a href="https://1800accountant.com/services/bookkeeping">bookkeeping</a>, <a href="https://1800accountant.com/services/business-tax-advisory">tax advisory</a>, and<a href="https://1800accountant.com/services/industry/freelancer-self-employed"> business tax preparation and filing</a> will help your real estate business maintain full IRS compliance with maximum tax savings.

Rental property management for a single vacation or short-term rental property can be a breeze when compared to the complexities of owning a portfolio of rental residences. How rental property owners and entrepreneurs are taxed is impacted when they own property in different states, how each property is classified

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Vacation & Short-Term Rental Accounting: How to Increase Profit

Partnerships, S corporations, estates, and trusts must attach IRS Schedule K-1s to their business tax returns. K-1 forms report each owner’s share of passthrough business activity. Schedule K-1 represents a critical component of passthrough entity tax compliance. However, IRS rules and instructions can confuse business owners.

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Everything You Need to Know About IRS Schedule K-1

As a small business owner, you know how managing your finances while ensuring accuracy can be a daunting task. Embracing the correct accounting practices is vital to your business's long-term success, as it is the best source for accurate financial records and advice to help you.

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How to Find the Right Accounting Service for a Small Business

Whether your small business has employees or you're close to making your first hire, it's essential to understand associated payroll responsibilities.&nbsp;It's not uncommon for small business owners to initially handle payroll as a cost-cutting measure. However, many find that the time taken away from core operations <a href="https://1800accountant.com/blog/payroll-compliance-checklist">and stress related to noncompliance</a>, payroll errors, and potential IRS penalties eventually outweigh the initial cost savings of doing it themselves. That's when they begin to wonder how much a payroll service costs for their small business and which they should go with.Use this blog to learn about general payroll costs, services, extras, and other considerations to weigh as you evaluate the optimal payroll solution for your small business operations.&nbsp;<h2>How Much Does a Small Business Payroll Service Cost?</h2><a href="https://www.investopedia.com/terms/p/payroll.asp" target="_blank">Several factors will determine payroll costs for your small business</a>. Many payroll providers charge a monthly service base fee ranging from $20 to $200. You will also be charged a fee per employee each pay period and may be charged extra for the following:&nbsp;<ul><li>Multistate employee payroll processing&nbsp;</li><li>State and federal payroll tax filings&nbsp;</li><li>Software and subscriptions</li><li>Payroll extras beyond base service&nbsp;</li></ul>Consider hiring a payroll specialist if you prefer payroll duties to be handled professionally in-house. The salary for a payroll specialist varies by region and can range from $54,000 to $78,000 annually.&nbsp;<h2>What Do Payroll Services Handle?</h2><a href="https://1800accountant.com/blog/small-business-payroll-challenges">Payroll companies will typically provide base services</a> that achieve your primary goal of remaining compliant with applicable state and federal authorities while paying employees accurately and on time. They may also offer payroll extras to a narrower group of clients who require more specialized services.&nbsp;<h3>Payroll Basics</h3>In addition to compliance and paying your employees on time, your payroll company should be able to provide basic services, including:&nbsp;<ul><li>Payroll record retention&nbsp;</li><li>Tax withholdings&nbsp;</li><li>Fund distribution&nbsp;</li><li>Report and remit payroll tax payments&nbsp;</li></ul>If your small business requires more specialized offline or online payroll services, inquire about any payroll extras they provide and whether they can customize your service plan.&nbsp;<h3>Payroll Extras</h3>Extra payroll services are usually offered for an additional fee, and like basic payroll services, the precise cost depends on several factors, including the number of employees to be processed.Payroll extras your small business may need include:&nbsp;<ul><li>401(k) match</li><li>Automatic check signatures</li><li>Paper check printing and delivery</li><li>Direct deposit option</li><li>State and federal tax filing</li><li>Tax form processing</li><li>Tax penalty protection</li><li>Time tracking</li><li>Worker’s comp</li></ul><h2>Payroll Cost Factors</h2><a href="https://1800accountant.com/blog/how-much-does-a-cpa-cost">Your small business payroll costs will depend on several factors and requirements</a>. Outside of service fees, you will likely pay a fee per employee and a fee each time payroll is run. If your business runs payroll weekly, you may be able to reduce costs by altering your payroll frequency to a bi-weekly schedule.Multistate employee payroll processing, state and federal payroll tax filings, including FICA, and additional payroll services all contribute to your costs. All of these cost considerations can be dizzying, but there are formulas you can use to gain a general idea of costs by making a payroll cost estimate.&nbsp;&nbsp;<h3>How to Estimate Your Payroll Service Costs</h3><a href="https://1800accountant.com/blog/how-much-does-a-bookkeeper-cost">Estimating payroll service costs</a> will give you an idea of how much you would budget for the month or year. Use this formula to estimate your cost of payroll:&nbsp;<ul><li>(Monthly fee) + (number of employees) x (per-employee fee) x (pay periods per month)</li></ul>For example, $100 monthly fee + five employees x $10 fee per employee x two payment periods per month = $200 per month or $2,400 per year in standard payroll costs. This estimate excludes extra payroll services that will increase your monthly costs, which include:&nbsp;<ul><li>Year-end W-2 or 1099 form processing</li><li>Multi-state filings</li><li>Benefits management, including 401(k) and health insurance</li><li>Tax penalty protection or compliance add-ons</li></ul>Understanding your payroll business needs today while accounting for continued growth is essential.&nbsp;<h2>Are Payroll Services Worth It?</h2>Opinions differ among small business owners on whether payroll service providers justify the costs. Newer owners with fewer resources typically favor doing payroll themselves, while more established owners favor a service.Many established business owners initially handled payroll to reduce costs, typically as a short-term benefit. However, potential errors that can trigger compliance issues and penalties, in addition to the hours spent per pay period, <a href="https://1800accountant.com/blog/payroll-debit-cards">are some of the top reasons businesses use professional payroll services</a>.Payroll services help businesses:&nbsp;<ul><li>Avoid IRS penalties and late filing fees, which impact nearly half of small businesses with fines ranging from a few hundred dollars to over $1,000.</li><li>Ensure employees are paid accurately and on time, increasing retention and boosting morale.</li><li>Stay compliant with complex, changing state and federal payroll tax laws.</li><li>Gain peace of mind via professional payroll support—so owners can focus on their bottom line and growth, not hours of payroll paperwork.</li><li>Reduce the risk of exposure and liability due to misclassification or incorrect tax withholding.</li><li><a href="https://1800accountant.com/blog/payroll-tax-returns">Promote long-term return on investment (ROI)</a> with fewer fines, lower administrative costs, and more efficient operations.</li></ul><h2>Outsourcing Payroll vs. Payroll Software vs. In-House Payroll Employee</h2>Hiring an in-house payroll expert is the most expensive option, with an average salary of $65,000 annually, not including employee benefits or other costs. While this option requires the most investment, it gives you the most control over payroll compared to services or accounting software. Many small businesses will embrace other payroll options before considering a new employee.Several small business owners are still price-conscious but desire a superior solution to doing payroll themselves. Software, such as Quickbooks Payroll, Paychex, Gusto, and ADP, is a popular, cost-effective way for small business owners to upgrade their payroll processes without the significant overhead of hiring a full-time payroll employee. Software fees vary but usually range from $40 – $100 per month in addition to a cost per employee, which can be a couple of dollars per pay period. Unlike hiring an expert to address this time-consuming work for you, you will still have an active role in running payroll each period. Automation and other software features and functionality will reduce mistakes and streamline the time it takes to run payroll, but you can't fully wash your hands of these responsibilities with the payroll software option.&nbsp;With outsourced payroll, like 1-800Accountant's full-service, <a href="https://1800accountant.com/blog/what-are-payroll-deductions">tax-deductible payroll solution</a>, you get the expertise of a payroll professional with the favorable pricing structure of payroll software. However, unlike do-it-yourself software, which requires time and attention, our payroll solution handles all your obligations. Your payroll expert adheres to IRS and state depositary schedules while handling your registrations, filings, and tax remittances.Compliance is achieved by ensuring your employees are classified correctly, your payroll is calculated accurately, and it is run on time each pay period. We also retain records detailing all hours worked, wages paid, deductions, and withholdings associated with your employees' pay.Our payroll service costs $89/month or $979 annually for your first employee and $39/month or $429 annually per additional employee. <a href="https://1800accountant.com/blog/small-business-payroll">There is a one-time $200 onboarding fee</a>.<h2>For Stress-Free Payroll, Talk to the Experts at 1-800Accountant</h2><a href="https://www.forbes.com/advisor/business/software/best-online-bookkeeping-services/" target="_blank">For an affordable, tax-deductible, stress-free payroll system powered by experts, look no further than 1-800Accountant’s payroll service</a>. When you trust 1-800Accountant with your payroll, our robust, full-service solution handles your requirements, integrations, and responsibilities each pay period. The typical pay period goes like this: Your payroll expert will collect and address your employees' hours, earnings, deductions, and other data required to calculate net pay. They will then distribute wages and paychecks to your employees and report and remit associated taxes to relevant governmental authorities.&nbsp;Save time and achieve your payroll goals by scheduling a free consultation–usually 30 minutes or less—to learn how we can help you maintain full IRS compliance with maximum tax savings.

It's not uncommon for small business owners to initially handle payroll as a cost-cutting measure. However, many find that the time taken away from core operations and stress related to noncompliance, payroll errors, and potential IRS penalties eventually outweigh the initial cost savings of doing it themselves. That's when they begin to wonder how much a payroll service costs for their small business and which they should go with.

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How Much Does a Payroll Service Cost for a Small Business?

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