When it comes to writing off business expenses on taxes, there are plenty of factors that you must take into account. The process can be much smoother and easier if you are in the habit of keeping well maintained track of small business taxes and deductions correctly. This habit can go a long way in saving taxes that you pay to your state’s coffers and to the federal IRS. Always remember, when you prepare your business taxes correctly and completely, you can keep more income for yourself. Here’s a brief rundown on how to go about it.
Keep Track Of All Your Bills And Receipts
The laws require you to attach relevant receipts for writing off business expenses on taxes. Therefore, it is very important for you to keep all bills and receipts safe in a file. Keep everything well documented; you must have a clear idea on paper where your hard earned money is going to and which of them can be used for tax deductions. Whether you are running a large company or a small business, whether you are running a partnership firm or just working as self-employed as a sole proprietor, you must file all your receipts properly whenever you make your purchase. Losing the recipes may mean losing the opportunity to save some money on taxes. The process does not have to be very tiresome or complicated; all you need to do is just to start a simple filing system, such as file folder with accordion-style. Alternatively, you can simply use a box and put all your receipts in it as and when they come in. This option may sound like a time saving one; it is just that you will have to work a little harder when it is tax time and you have to find out the right recipes (especially if you a lot of them).
Acquire Knowledge About Those Expenses That Are Deductible
When it comes to writing off business expenses on taxes, you must have a clear idea about what expenses are deductible and what are not. Following is a brief list of categories of items that are deductible.
- Miscellaneous expenses, such as landscaping or cleaning service fees, tax preparation fees, prescriptions, doctor and dental bills, health insurance, and other medical expenses.
- Subscriptions, such as certain online services (premium ones where you have to pay for membership) or magazines or newspapers that you subscribe to keep yourself updated with the latest development and happenings in the industry your business belongs to.
- Postage for business-related mailings
- Telephone or internet service – though you cannot deduct these expenses in every situation, but your tax lawyer or accountant can definitely help you get a portion of it deducted; so make sure you discuss it with them when the next time you prepare taxes.
- Supplies, such as staplers, pens, printer ink, fax paper, and computer paper
- Office equipment, such as telephones, cash registers, fax machines, printers, and computers.
Make Proper Entries About Your Expense Sin Ledger
In order to streamline the process of writing off business expenses on taxes, you are also advised to make proper entries in ledger about all your business expenses. The entries must include the basic information, such as the receipt numbers, the nature of expenses, which categories they belong to, and the amount of expense. It will be better if you also mark off those receipts that you have already entered into ledger. This will avoid any confusion at a later stage, such as the chances of making double ledger entry for the same receipt can be minimized because of this.
Overall, if you follow the above steps thoroughly, you should face much difficulty at the time of filing tax return and writing off business expenses on taxes.