Hidden Tax Deductions

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.

starbucks blog#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.

Caring for Mom’s Nest Egg

Lillian was having problems paying bills on time and managing her life’s paperwork. She worried about it constantly, but didn’t want her grown children to know—after all, they had their own families to tend to and didn’t live close by. Since her early 70s she’d noticed her memory slipping, but after Joe her husband of 53 years passed a few years ago, life had become stressful. Joe had done everything around the house, including the bill paying. By her 76th birthday, Lillian was still in fairly good shape physically. She stayed active and tended to her dietary needs. However, her short term memory issues worsened so that some bills were paid late. Developing cataracts made close-up work difficult and bill paying a frustration.

After an honest and loving conversation between Lillian and her adult children about these struggles, the decision was made to engage a Daily Money Manager (DMM).

birds nestNot 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.

Daily Money Managers provide services that are highly customized to their client’s needs. Nowadays, clients have their bills sent directly to the DMM company, which scrutinizes them for accuracy then pays them out of the client’s checking account. If anything irregular appears on a bill, they verify the payment with the client beforehand.

Had Lillian engaged with DLMoneyMatter’s DMM division, she would now be enjoying her retirement free from the worries of managing her daily financial affairs—and her children would have the peace of mind that Mom is safe from late fees, fraud, and daily money worries. If you have a Lillian in your life, or know someone who does, please forward this email or refer them to us for a free, no-obligation quote on Daily Money Management services with us.

QuickBooks Makes It Look So Easy

Income-Expense-Profit chartIn 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.

While most business owners can handle the software, it does take their focus away from their business. Those who do eventually hire accounting help discover too late that the business wasn’t doing nearly as well as they thought.

Financial decisions are critical throughout the year, but are intense in the months just before tax time. In late-February through mid-March, small business owners often email to their trusty tax accountant their QuickBooks summary for the year. Then they cross their fingers. For most tax accountants, the job is to prepare the tax forms, not to perform audits on every entry in QuickBooks. And neither is tax time when you want to find out that payroll taxes weren’t filed on time, or that your books are unusable.

There’s nothing like a happy tax accountant who just received a correct and complete QuickBooks file from a smart business owner. It’s likely to happen when a bookkeeping service like DL MoneyMatters performs the day-to-day hands-on tasks of filing paperwork, sending out and paying invoices on time, tracking expenses and recording every dollar in and out.

If you are a small business owner who runs their business on a shoestring, or you know someone who is, we’d like the opportunity to have a conversation. We hope you will refer us.