It is that time of year - when businesses begin to prepare for filing an annual tax return. Planning for tax deductible business expenses is a shrewd way to change the outcome of your tax return. The IRS allows any 'ordinary and necessary' expenses you incur in the operations of your business. However, it is always important to make sure you are only taking advantage of proper tax rules rather than 'flying under the radar'. Tax law is not negotiable. There are gray areas and Chandler & Knowles CPA can help you navigate the muddy waters of the world of tax rules. Five of the most common tax deductible business expenses include:
Accounting, Bookkeeping and Tax Expenses
This would include your business accountant and bookkeeper who perform such services as: prepare and send your quarterly/annual tax returns, reconciliations, running financial reports, and payroll. The taxes you pay would then be categorized according to the type of tax. For example, unemployment tax is considered a payroll expense. On the contrary, the expenses you claim for paying your employees would be split between wages, taxes and benefits.
Most businesses need to do some type of advertising. Gone are the days of the yellow pages but now there are lots of other avenues. Social media has become a very popular way to get your name out there. While some of that is free, if you boost a posting or do a Facebook ad, the expense of that is deductible. In addition, if you hire a marketing company to design a website or do social media posting, these are considered tax deductible business expenses. Also, the costs of maintenance, hosting or domain, and any premium services is deductible.
Books, Magazines and Software
If you purchase books, even through an electronic device, these can be claimed. Software subscriptions such as Adobe Creative Cloud or Quickbooks Online are tax deductible business expenses. Magazine subscriptions that you purchase to stay current on technology, events, are industry-related or even to put in a waiting room for clients to look at while waiting to be seen, are all expenses for your business.
Most companies have a car or truck that is used to call on customers, run a route, or other business-related travel. It can be local or out of state. There are some rules on how vehicle expenses are claimed. Chandler & Knowles CPA can help you determine the best way to utilize this overhead as an expense.
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Anyone that you pay to do a service can be considered a contractor. You must be careful when determining if someone is an employee or a contractor. Generally, a contractor is an individual or company that performs a service on their own terms. You do not provide tools, direction or dictate the time frame (other than deadlines) that the work is done. This would be someone who has their own office away from yours or works from home. Contractors should provide you with a W-9 to solidify the relationship is not employee/employer. It is also wise to obtain an invoice for work done by contractors.