How to Avoid the Tax-Time Scramble
- Receipts for sales or service.
- Sales records (for accrual-based taxpayers).
- Beginning and ending inventory along with purchases or items removed for personal purposes.
- Returns and allowances.
- Interest earned on checking or savings accounts.
- Any other income.
Business expenses are subtracted from the overall income of your business to determine profit and tax liability. You should have receipts detailing all expenses incurred by the business over the year. The IRS (www.irs.gov) offers tips on whether a business expense is deductible or not. Typical expenses include the following:
- Wages and payment to subcontractors.
- Office supplies. Pens, paper, printer ink, etc.
- Business-use vehicle expense. Mileage, repair and lease expenses may be deductible.
- Office space rent.
- Home office expense. Small businesses operated out of the home are entitled to deductions based on the percentage of the home used for business. For example, insurance, utilities, and home repairs may be partially deductible. To qualify, your home must be your main business location and a specific part of your home must be designated for business purposes.
- Repairs, maintenance and cleaning of business facility.
- Interest spent. Mortgage or business loans including bank and credit cards.
- Transportation. Vehicle mileage and any receipts for public transportation, parking, and tolls.
- Out-of-town travel. This may include airfare, hotels, office rental, meals up to a certain amount, taxes, tips, internet connection, and local transportation.
- Advertising expenses.
- Entertainment. According to the IRS, in order to deduct entertainment you must show the main purpose was active business, and you had a general expectation of future business. Other guidelines may apply or even allow for additional deductions. See I.R.S. Website.
- Depreciation schedules. Initial cost and date of assets purchased, sales price and date of assets sold.
- Employer-paid benefits. For example, health insurance premiums and profit sharing.
- Retirement funding. Small business owners can deduct contributions to retirement plans.
- Business insurance.
- Attorney or legal fees.
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