Tax season is well upon us now and for Boise small business owners, that means collecting and organizing all of our expenses, income, and write-offs from the past year. Many business owners, particularly those who are new to the world of entrepreneurship, are not benefiting as much as they can from keeping track and reporting their business write-offs. There are a lot expenses when it comes to owning your business and most of them can be reported to lower how much you owe at the end or the year or quarter.
To start off, you may be asking what exactly is a business write-off. According to Wikipedia, “In income tax calculation, a write-off is the itemized deduction of an item’s value from one’s taxable income. Thus, if a person in the USA has a taxable income of $50,000 per year, a $100 telephone for business use would lower the taxable income to $49,900. If that person is in a 25% tax bracket, the tax due would be lowered by $25. Thus the net cost of the telephone is $75 instead of $100.” A write-off must be an expense that is spent for your business (ie telephone bills, gas/mileage, office rent, office supplies, business lunches, etc.). This is important to remember: the write-off is not deducted from the amount you owe but instead the amount you report for your taxable income. Also, it typically isn’t the whole amount of the write-off that is deducted but instead a percentage of the expense.
Here is a list of various business write-offs you should be keeping track of and reporting:
- Shipping/mailing supplies and cost
- Storage Costs (for products you sell)
- Office Rent/Utilities (These are also referred to as overhead costs… if you work at home, go here for home office tax regulations)
- Gas/Mileage OR Car Expenses such as repairs, oil, insurance, etc.
- Employee’s Pay
- Retirement Plans
- Advertising/Marketing Costs and Materials
- Printing Costs
- Office Supplies and Stationary
- Business Conferences
- Business Meetings (Meals, Conference Room costs, etc.)
- Legal/Financial Fees
- Reference Material and Subscriptions
- Business Travel Costs
- Charitable Contributions
- Office Furniture
Organizing your expenses is extremely important… keep all receipts and jot down on the receipt what/who exactly it is for. For example, if you go to a consultation over lunch with “Bob” from “Business A” and you pay for Bob and yourself, keep a copy of receipt and write something like, “Lunch with Bob from Business A | Consultation for Potential Project.” Keep a file or folder for all of your expense receipts for the course of the year or quarter.
Of course we are web designers not accountants, so we recommend meeting with an accountant and also checking out the IRS site for further information.
Until Next Time!
Bonnie Olswanger | Thrive Web Designs, a Boise web design company