Small business owners do everything from marketing to accounting to finance. With so much resting on the shoulders of these small business owners, who has time for taxes? These eight tips are sure to save your small business time AND money!
Keep track of EVERY business expense!
Whether this be a drawer you toss all your receipts in, or an accounting system on your computer, having everything recorded and saved pays off in a major way when it comes time to do your taxes. To maximize deductions, you'll need to have all these receipts as proof of your business expenses. Don’t forget to save the cash receipts you may have otherwise forgotten about. Lastly, keep in mind that any meal you pay for while taking out a client are 50% deductible (simply note the purpose of the meal on the receipt).
Deduct up to $5,000 of fees associated with launching your business during the first year
Starting a business is expensive! Keeping track of all those expenses to get your business up and running will end up paying off come tax season.
Write off educational expenses
All those classes, seminars, and trade conferences you've attended have not only pay off in experience but in tax deductions as well! If they help maintain or improve skills related to your business, they are deductible!
Donate unused inventory and supplies
If you are ever left with extra inventory, consider donating it in exchange for a tax deduction. Most businesses will pay to store this unused inventory rather than donating it because they are unaware of the tax break.
Work at home? Deduct your office!
Many small business owners choose to conduct business out of a home office. If this office is clearly separated from the living area, it is eligible for a deduction. This deduction is calculated by subtracting the square footage of the office from the total square feet of the home. Once you have this number, you can begin to subtract out the portion of utilities such as gas and electricity to receive money back on those expenses used for the office-portion of the home. You can even deduct the portion of rent or mortgage that go towards the office! Make sure to use everything in your home office for business purposes only. Computers or telephones in your home office used for personal matters put your business at risk of being audited. These deductions also apply to an office space rented in a building other than your home.
Work vehicle = write off
Make sure to keep track of all expenses associated with your work vehicles as they are eligible for tax deductions. These expenses include gasoline, mileage, and routine maintenance such as oil changes. Records of expenses, including receipts, may be required by the IRS to receive the deduction, so hang onto them!
Most businesses need computers, telephones, printers, fax machines, and copiers among many other essential pieces of technology. These can all be eligible for deductions so long as they are solely business-related and the purchase record is saved.
Make sure to keep track of how much you pay out to contracted employees. If they are paid over $600 a year then you are eligible to deduct this expense. All you need is for the employee to fill out a 1099-MISC form and submit it along with your taxes.
Other fully-deductible expenses:
- Advertising expenses
- Commission payments
- Legal fees
- Mortgage interest
- Business loan interest
- Machine/equipment rental costs
- “Ordinary” repairs (i.e. must not add to the company's value)
Be sure to take advantage of these tax tips and best of luck filing your taxes this year!