Common Tax Deductions Missed by Small Business Owners
Most small business owners don’t realize everything that comes with starting their business. Like an infant, you have birthed this new business into this world, and you are now responsible for caring for it from infancy to maturity. Like so many new parents that struggle to manage the to-do list of caring for their new little one, small business owners often do the same. The truth is, just when you think you have everything covered, you often discover that there is something else you didn’t know or that you missed. To ensure success, business owners must consistently invest in education and partner with reliable resources.
An area where a lot of new business owners find themselves bumbling a bit is the management of their taxes and expenses. How do you know what to expense and what not to expense, and what is required to claim those expenses on your taxes? In this blog, we’d like to explore some key expenses that business owners often miss when they are filing their business taxes.
Business Insurance
Some business owners don’t realize they need business insurance, but like any other insurance, you want to protect your investment. If you provide any government contracting work, most government agencies will require that you have insurance to do business with them. So, it is an essential business operating cost, even if you have a service business. Did you know that many of your premiums for your business insurance are tax-deductible? Keep track of this information to share with your tax professional to ensure you don’t miss out on this tax deduction when filing.
Meals
Did you take your customers out to dinner or lunch, or perhaps you grabbed lunch while you were conducting a business task? Did you realize that that meal was deductible? It’s easy to forget to track all your meals while you are working in your business, but it’s worth it if you can deduct them on your taxes. As a rule of thumb, we’d suggest that you just keep the receipts for all meals and make a note of what they were for. When you are filing your taxes, you will need to account for the date and time of the meal, the total cost, the location and who you dined with and/or the business purpose of the meal. Utilizing an accounting software like QuickBooks can help automate expense records and groupings to make this tax filing process a little easier for you.
Team Members
Whether you have salaried employees or 1099 contract workers, you may be able to claim tax benefits from their payout. When it comes to your contract workers, this may include people who are working directly for you, but it may also include vendors you hire for your business-like attorneys, CPAs, marketing professionals and more. Deductions for your W-2 employees might include benefits like health insurance or paid time off. To make sure you are accurately claiming this during tax time, it's recommended that you review your options with a tax professional.
Education & Training
Continued education is considered an investment into your business, and therefore, is taxable. Most business owners understand that you can write off training seminars or classes taken to learn more about business. But did you realize that you can also claim books purchased and trade journals subscribed to stay abreast of business education in your field? Like all other taxable items, you will need to keep accurate records of these purchases to review with your tax professional.
Interest, Fees & Charitable Donations
Most small business owners don’t think interest on business credit cards is something they would be able to claim on their business taxes, but that couldn’t be further from the truth. Not only can you claim interest on credit cards and bank accounts, but you may even be able to deduct any late fees you incurred over the year. If you contributed to any charitable organizations, please keep record of this as well because this may be something you can deduct on your taxes.
The lesson learned here is that there are often more opportunities for deductions than you might think. It is better to err on the side of caution and track everything rather than assume you will not get credit for it. The best way to ensure that you are tracking everything you need and getting all the deductions that your business deserves is to work with a reliable tax professional like VAAS Professionals.
VAAS Professionals has been working with small businesses to manage their taxes and finances for 20 years and counting. Our team is dedicated to educating and working with the small business community to serve all your tax and accounting needs.