With the tax deadline quickly approaching, businesses are reviewing their bookkeeping to find possible deductions, including some valuable ways to write off expenses.
Here are some tips from Bookkeeping.net, an online directory of bookkeeping services, to be sure all the possible deductions are found. Though owners must meet their responsibilities to the IRS, they should make use of the breaks afforded them to keep their business financials strong.
While managing their bookkeeping, businesses should deduct all ordinary and necessary expenses from their revenue so their taxable income is decreased. These can include the following deductions:
1. Vehicle expenses that are used for the business. Owners can use either an actual expense method or a standard mileage rate method to determine their deduction. The proper method will depend upon whether the owner uses the auto primarily for business or both personal and business use.
2. Bookkeeping, accounting and payroll services, legal, tax and other professional fees are fully deductible because they are a cost of running the company.
3. Business losses can be deducted from an owner's personal income if the owner experiences financial losses that exceed the personal income for the year. Additionally, some of the year's company losses can be used to decrease the taxable income in upcoming years.
4. Certain travel and entertainment costs can be deducted.
If travel is more than 50 percent business related, then expenses such as plane tickets, transportation costs, lodging, meals, laundry, and communication expenses can be deducted. However, if the family joins, their expenses cannot be included. Half of entertainment tabs can be deducted if the owner pays for the cost of entertaining present or potential clients.
5. When reviewing the bookkeeping, remember that some interest, new equipment and taxes may be deductible. Take into account interest on personal loans or credit. New equipment for company use, such as software, may be added.
Taxes can be a little trickier, so a professional bookkeeper or accountant should be consulted. Generally these are taxes incurred while operating the company, such as sales tax on new items, employment tax, real estate tax, etc.
Some deductions are not well known so a bookkeeping or tax professional should be consulted to ensure a company is able to seize all their deduction opportunities. These can include moving expenses, advertising and promotion costs, charitable contributions, and training and education expenses.
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