Everything you need to know about insurance basics, like coverage types, limits, cost and more.
Leverage Business Expenses and Tax Deductions
Managing itemized deductions is a daily job.
When it comes to business taxes, entrepreneurs may be tempted to focus on other tasks and let the accountant handle it. But neglecting to consider the tax implications of everyday expenses can cost your company time and money in the long run.
“Small businesses need to be aware of what kind of documentation to keep not only for tax purposes, but also to substantiate how your business is doing,” says Barbara Weltman, a tax expert and owner of Big Ideas for Small Business Inc.
Ready to find some key tax breaks? Keep your business in check by watching out for these often overlooked deductions.
Write Off the Expense of Going into Business
Entrepreneurs often spend money before a company opens its doors. While the startup costs of advertising, marketing, utilities, office supplies and repairs are often necessary, they can add up to huge deductions. If you spend $50,000 or less , you may be able to deduct up to $5,000 in startup costs in the first year, and gradually reduce the remainder over 15 years. Track expenses with tax planning software from companies such as Intuit, H&R Block, or TaxACT. “Technology offers a lot of simple solutions for owners trying to track their income and expenses,” says Weltman.
Get a Tax Break for Legal and Professional Fees
Once your business has grown enough to hire staff, manage payroll, and track inventory, it’s time to look for dedicated professionals. “Either have someone on staff or engage a QuickBooks professional or CPA to keep the records for the business,” says Weltman. But the more you pay for professional help, the more you could save on taxes. Even fees paid to a lawyer, tax professional, or consultants are deductible in the year incurred.
Leverage the Home Office Tax Deduction
We’re not talking about the desk in the corner here. To claim a business deduction for your home, you must meet certain qualifications, such as using part of your house exclusively and regularly as your principal place of business, for storage of products, or for providing daycare services. You can take a simplified home office deduction of up to $1,500 or go the more traditional route of adding up all your qualifying expenses. Owners who don’t want to deal with receipts, calculations, and taking and comparing measurements of their home office to their home’s square footage may be leaving money on the table.
Business Entertainment Tax Expenses
Don’t assume that a dinner with an old colleague while taking a business trip isn’t deductible. If in any part of that conversation you discussed current or future business opportunities, you may be able to write-off the cost of the meal. Other possible tax write-offs when traveling for business include lodging, rental cars, plane fare, telephone calls, faxes and tips . “Whether it’s a deduction, a tax credit or a write-off over time or all at once, those are the intricacies of the tax rules, so it really comes down to the record-keeping,” says Weltman.
Employee Tax Deductible Expenses
If you reimburse employees for expenses related to work such as gas, meals, hotels, tips and transportation fees, it may be deductible. Make sure employees submit their expenses in a timely manner and that you make reimbursements promptly. This is where great record-keeping is essential. Small business owners must separate their personal and business accounts, otherwise, “everything gets jumbled and it makes it very difficult to keep accurate records for tax purposes,” says Weltman.
Part of good leadership is incorporating tax planning strategies year round. Another important element is carefully insuring the investments that you’ve worked so hard for. Contact an American Family Insurance agent to discuss custom-designing coverage that meets your business needs. “As long as you have good records, talk to professionals and use good resources to guide you, then you’re in a position to make the best decisions about how to treat the various expenses that your business has,” says Weltman.