Often, the most important thing you can do to save money on your taxes is to keep good records. If you’re a small business owner, or you do volunteer work or other qualified
If it’s not in here, it’s not deductible.
activities throughout the year, that means tracking a lot of little expenses, because they can add up. Of course, you remember to deduct that new computer, and the money you pay the accountant, and you’re taking your home office deduction. But are you capturing all the small expenses, too?
Expenses We Forget
It’s amazing how much goes into running a small business. Good organization is crucial or things can become tangled between business and personal accounts, especially for sole proprietors. You’re doing your grocery shopping and remember you need a new desk calendar, so you toss one in the cart. Or you’re shopping for an Anniversary gift on Amazon and see a good deal on printer ink, so you stock up. Or maybe you’re meeting a potential client for breakfast. While you remembered to deduct your meal, you’re not used to noting the mileage you put on the car to get there.
These common but small expenses can add up to a major tax deduction. The trick is keeping detailed records and remembering to deduct them at tax time. Some of the most common (and often forgotten) business expenses include:
- PayPal and other payment processing fees. 3% of every payment you receive via PayPal goes to them. Make sure you’re tracking those fees over the course of the year and deducting them as “bank fees”.
- Dues and subscriptions. Any recurring charges for media, educational material, or other business-related subscriptions like magazines, paid forums, or professional associations are tax deductible. Don’t forget to note them all down.
- Office supplies. Everything from paper clips to a brand new computer can be deducted if it is used strictly for business purposes.
- Domain names and hosting. Your hosting bill, domain name purchases, etc.
- Advertising. Any charge for online or offline advertising or materials that go toward advertising you do yourself (like posting flyers around town) can be deducted as a business expense.
- Commissions. If you pay someone a commission for selling your goods or services on your behalf, you can deduct that expense even though they’re not actually your employee.
Keep Good Records
The key to saving money on your taxes lies in keeping good records. For most small businesses, the easiest and best solution is to use a software program like Quickbooks or Peachtree. For some, however, good old fashioned pen and paper works just fine. Whichever solution you choose, though, make sure you consistently record your expenses. Scrambling to get it all together at the end of the year would be a nightmare.
Instead, schedule some time each week to update your books. If you’re not the type to deal well with numbers, consider hiring someone to handle your accounts for you. Remember – what you pay him or her is deductible too!
Finding all those hidden expenses can mean hundreds or even thousands of dollars at the end of the year. While the things listed here will get you started, it’s a good idea to also speak with a tax professional. Once they fully understand the nature of your business, he or she can ask the right questions and make appropriate recommendations for your business deductions.
Photo credit: KAZVorpal