Season of Giving and Maximizing Tax Deductions

Let’s talk taxes!

I know, don’t groan at the computer screen! There are two groups of people who like tax season: accountants and the IRS. But tax season doesn’t have to be agonizing or painful; in fact, if you start now, doing a few simple things, tax season in April will be a lot less painful and can save your small business money!

 

Profit in tax deductions:

One way to make your small business more profitable (without working harder) is to maximize your tax deductions. Fewer taxes, means more money you can put in your pocket, or back into the business. You have a lot of expenses as a business owner; did you know you can write off quite a few of them as a deduction on your taxes?

 

What tax deductions or “tax write-offs” can you use as a small business?

We’ve already talked about the CARES Act, and how to maximize your credits from the federal government, here are some deductions you’ll want to take advantage of when getting ready to file your taxes:

  • Home office deduction: If you are an employee of a bigger business, this will not apply to you. However, if you own the business or if you are a partner, you can claim your business expenses in your company’s tax return. (Yes, you may have to measure and record square footage. Do it! It’s worth the time….and crawling on the floor!)
  • Utilities: Rather at the office or at home, the utilities used while conduction a business are deductible
  • Business use of a car
  • Advertising and Promotion expenses
  • Legal and professional fees: That money you pay your tax accountant to keep you legal – you can write off each year!
  • Telephone and cell phone: the portion you use in conducting business is deductible. Just remember those calls from your mother or wife, are NOT…unless your wife is making sure you ordered the widgets for the business that she asked you to do.
  • Security and monitoring expenses
  • Internet expenses
  • Computers and programs used in your business: Quickbooks, Photoshop, McAfee, etc.
  • Business meals
  • Business travel
  • Insurance for your business
  • Bank fees
  • Employee expenses and payments to contractors
  • Education expenses
  • Interest deductions from debt
  • Shipping expenses
  • License expenses
  • Rent
  • Contributions to an IRA or other qualified retirement plan
  • Charitable contributions

 

Keep it legal!

Whether you are a small business of one, or ten or two-hundred, the rules for tax deductions are similar when it comes to small businesses. The rules DO vary slightly if you are registered as a sole proprietor, partnership, LLC, or S-Corp, so make sure you check with a qualified tax accountant on your deductions.

 

Keep records!

An IRS audit can be simple and painless, if you’ve kept good records. Most audits by the IRS, simply want you to prove your deduction. You can do that by:

  • Keeping receipts of all deductions
  • Ask for receipts from not-for-profits that you contribute to as a business
  • Keep time records
  • Keep a calendar of charitable events you sponsor or with which you are involved.
  • Have a great filing system to keep track of your deductions

 

You may think that the small donations here and there aren’t much, but they can add up. That $25 gift card to your restaurant you gave to a neighborhood 501c3?  Deductible! So are those 100 hamburger buns you donated to a local foodbank.

 

What about the holidays and the Season of Giving?

If you are a business owner, you’ve probably been asked for a donation for a charity or a charitable event. The good news is you can claim most (if not all) of your donations on your business taxes.

That community outreach program you use to help brand your business? You can deduct your donated items, meals, gift cards and even the time you spend contributing to the event. If you pay your employees to work a charitable event (that you are giving to) you can claim their wages as a charitable donation too! So, loosen those purse-strings! Not only can you feel good about donating as a business, but you can also claim a good number of those donations on your taxes.

 

 

For additional information on the what you can claim as a tax deduction on your small business taxes, (Check with your accountant) and then feel free to reach out to  us at the Small Business Development Center – SBDC – Serving Paris area:  Lamar, Hunt, Hopkins, Delta, and Red River counties.