Waiting until the end of the tax year to find, verify, and record potential tax deductions can take a toll on what otherwise could have been more productive time spent growing the business. To make life easier, you can hire a professional bookkeeper to do this for you or use an outside service, like us. For anyone just starting a new business, we’ve put together a list of a few of the most overlooked small-business tax deductions.
#1 Fees paid to your accountant, lawyer or business consultant
To run small business successfully, you need sound advice and a great accountant and bookkeeper. Fees paid to these professionals are “ordinary and necessary expenses directly related to operating your business” and are deductible in the tax year they were paid.
#2 Losses on bad debts
If you paid advance wages to hire a hot-shot “marketing expert” and she bailed on you 10 days into the job because your dress code was just a ‘bit too conservative’ for her, the IRS allows you to deduct those lost wages. You can claim a deduction for most bad business debt, but only if you included the amount owed to you in your gross income.
#3 Carryovers
Carryovers are overlooked deductions from previous years. These are not “carryouts” —so Starbucks to-go while driving to work is not deductible. What if, for example, you started a home-based business and your expenses in the first year were actually higher than your income? You can “carryover” the loss to a future year when you did earn income.
#4 Startup expenses
Start-up costs are out-of-pocket costs for both looking into buying a business and getting the business started. These might include analyzing the marketplace and buying capital equipment like trucks or computers. Then there’s domain name registration fees, website and advertising costs, wages for new employees, consultant fees, costs to secure goods or licensing—the list can be seem endless. It’s a critical time to stay focused on documenting every cost so your accountant can maximize your tax deductions.
The size of the business does matter in terms of complexity, but whether a small business or large enterprise, it pays to keep impeccable daily records. Or simply hire us to do that for you.
Not exclusively for seniors, DMMs have been in demand by the wealthy for generations. As the population aged and it became the norm for children to leave the hometowns they grew up in, daily money management filled a growing need. The computer age and the increase in fraud, especially scams that prey on seniors, called for a stronger degree of financial oversight for seniors. Whether living at home or in senior housing, elders without that oversight might see their nest egg gone.
In my last blog I said that among the 7 traits of entrepreneurs, handling their own books wasn’t one of them! This month, I take a closer look at small business owners who run their business on a shoestring, so may be having a hard time deciding whether or not to hire a bookkeeper or accountant — after all, most entrepreneurs are driven to do it all and would rather pay $24 per month for QuickBooks than hire financial help. Unfortunately, we often get what we pay for.