Tax compliance can place a large burden on small businesses, small business owners are more likely not to right off all of their expenses, and they often underpay their taxes. So it is important to find all of the tax breaks your small business is entitled to and to make sure you are staying compliant with your states tax laws. Below is a list of tax breaks you can and should be taking along with a few tips to stay compliant.
– Auto Expenses
If you use your car for your business you can deduct some of the costs of keeping it on the road. Make sure and keep track of your miles so you can deduct the standard mileage rate (57.5 cents per mile). You can also deduct all tolls and parking fees. Note that you can’t use the standard mileage rate if you have claimed accelerated depreciation deductions in prior years, or have taken a Section 179 deduction for the vehicle. You may also be able to deduct the depreciation on the vehicle if you use the actual expense method. Check with your tax adviser if your unsure how to deduct your auto expenses.
– Expenses of Going Into Business
Once you’re business is up and running you can deduct all expenses associated with keeping your doors open including advertising, utilities, office supplies, and repairs. You can deduct these capital expenses up to $5,000 the first year; and any remainder must be deducted in equal amounts over the next 15 years. Most business don’t see a profit the first few years of operation so you may want to think about taking the deduction over five years, so you’ll have some profits to offset.
– Books and Legal and Professional Fees
Make sure and deduct all of the business books you purchase when going into business, they are fully deductible as a cost of doing business. You can also deduct any and all fees you inquire from using tax professionals, business consultants, lawyers etc.
– Bad Debts
If you sell goods you can deduct the cost of those goods that were not able to sell and pay for that year. If you offer a service you cannot deduct the cost of someone not paying you for your time. So try and get at least a portion of your service fee upfront.
– Business Entertaining
This is always a fun one! Pick up the tab for dinner and other entertaining, events, and make sure you talk business then you can 50% of the cost. Make sure to note the purpose of the visit on your receipt so you have a record of what business you took care of while having a little fun.
If you travel for business then keep track of your expenses including the cost of plane fare, rental car, taxis, lodging, meals, shipping business materials, cleaning clothes, telephone calls, faxes, and any other costs associated with doing business on the road.
You can deduct the interest and carrying charges on purchases you make on credit for your business purchases.
– Education Expenses
We are always learning new skills to enhance and grow our business so make sure to keep track of any seminars or extended education classes you take so you can deduct the costs.
– Advertising and Promotion
Deduct your advertising and promotion costs such as — business cards, Google Ads, social media ads, etc. If you sponsor a local team or organization you can deduct that as a promotional cost as well and you can get fun tshirts made for everyone to wear!
Here are a few expenses that are often overlooked!
– audiotapes, webinars etc. that build your business skills
– bank charges
– business association dues
– business-related magazine subscriptions
– credit bureau fees
– coffee and beverage services
– consultant fees
– office supplies
– online business services
– parking costs
– trade shows
– taxi fare
Note: Just because you didn’t get a receipt doesn’t mean you can’t deduct the expense, so keep track of those small items.
While you are taking advantage of all of the above Small Business tax breaks and incentives make sure you are staying compliant with your states tax laws.
Here are a few more tips to help you stay up compliant:
Tip: Get informed about Nexus rules – Amazon now collects sales tax in half the states in which it does business due to expanding definitions of nexus. Now even web advertising that leads to sales in another state has new tax laws.
Tip: It is time to start E-filing if you haven’t already. It is the law in States who have updated filing requirements including California, Connecticut, New Mexico, and North Dakota. For more info try www.taxrates.com/state-rates/.
Tip: Reconcile your sales tax payment and convert over to a cloud-based financial package with real-time updates and lower hardware and implementation costs. Utilize a fully automated cloud-based sales tax it will save you time and money. When you integrate and automate managing your work flow is a breeze.
Tip: Say no to paper trails in 2015. Use E-payment and e-filing so you can track checks and payments easier.
Tip: Make sure and updated your filing frequencies on a regular basis so you don’t get into trouble. Go to www.taxrates.com/state-rates/and check yours now.
Tip: Check your states sales tax on products. With cloud based/digital goods such as music, movies, ebooks, and more the tax laws are changing so make sure you understand the taxability of new product offerings in your state.
Tip: Make sure your customers tax exempt status is up to date. If you have expired exemption certificates, have changed your company name, or purchased a new company you will need to get new certificates. Inaccurate or missing exemption certificates are a major cause of audits, so get make sure you get this done soon.
Tip: You could be paying the wrong sales tax if your using zip codes to pin point your transaction location. Use geo-location pinpoints instead they are more accurate then zip codes in the tech age.