Throughout the year, you pay for things that you can claim tax relief for. However, small business tax deductions require receipts and proper financial recording. When you are running a small business it can be difficult to keep track of everything and receipts have a habit of getting lost. This will cost you money in the form of a high tax bill and as we all want to pay the IRS as little as possible, what can you do about it?
Outsource Your Bookkeeping
Outsource your work to a quality bookkeeping service. You may feel that this is an expense you can do without, but when you have expert bookkeepers doing the job they will save you more money than they will cost. This is because they understand all the regulations and rules, what you can and can’t claim for and they will ensure that everything is submitted as and when it should be so that you avoid those very nasty IRS penalties. As a legitimate cost, their fees would, of course, be tax deductible.
Business Use Of A Private Vehicle
If you have a private vehicle that is also used for business, you can claim a portion of the running costs against your tax bill. The most efficient way of doing this is to record all your business mileage and then draw the prescribed amount for the engine size of the vehicle you are using. Parking and tolls are also deductible.
Other Business Travel
If you have to fly, travel by train or take a boat trip for business, the cost is tax deductible, as are the hotel costs and 50% of any food you have to buy. There are some restrictions in place. If for instance, you take your spouse on a business trip with you, their costs would not be deductible. If the only way for you to get somewhere was by taking a cruise ship for 6 weeks that is also likely to be disallowed.
Claiming For A Home Office
If you have turned part of your home into an office for business use you may be able to claim some portion of expenses towards it. It has to be costs that are in addition to what you were already paying which might mean there are not many things that are tax deductible. It could be just things like the Internet and phone bill, but anything that helps to reduce your tax liability is better than nothing.
Anything That Costs Money
You can claim any expense that is wholly and purely for business use. There will always be exceptions to this but there are not many. The use of your car and a home office are just two typical examples.
Generally, you have to be able to prove a cost if the IRS request you to. This could be a receipt, an invoice, a credit card statement or the payment leaving your bank. This is why excellent record keeping is vital, or you may find that they could disallow some items.
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