Standard monthly expenses for your Business are transferred from you to your Tax Professional to be put on your Schedule C. No problem; most people get this part right. It’s the thousands of dollars in miscellaneous receipts that many people forget when under the haze of tax season. These miscellaneous expenditures can save a small business owner hundreds, if not thousands, of dollars in tax liabilities. Examples:
1. Advertising Cost – The standard deductions are always there, Newspaper Ads, Business Cards, Outside Signs, Yellow Page Ad….. But what about the one-time cost for the Search Engine submission of $450, or the renewal of your three domain names at $8.95 per name, and the particular pay-per-click campaign of $720.00, a total of $1196.85
2. What about the little gifts you purchased for clients that had referred new clients to you? $25.00 each, ten gifts. Total $300.00
3. Shipping cost, remember those three rush jobs when you shipped documents to the clients using Fed Ex? You don’t know where the receipts are; however, it was $17.50 each time. $17.50 x 3 = 52.50
4. Oh yes, what about when you rented the cleaning machine to clean the office carpet? It was cheaper than calling a professional carpet cleaning service, or so you thought! $55.00
5. Don’t forget that your spouse’s boss’s son was selling that Pre-Paid Legal Service that costs $19.95 monthly. It is to be used 100% for Business. Ya, I guess! OK, $19.95 x 12 = $239.40
6. Remember when the kids at the bus stop broke the office window throwing the football back and forth? You were so upset that you accidentally locked your keys in the office. $180.00 for window replacement and $85.00 for a Mobile Locksmith. $180 + 85.00 = $265.00
7. Is there anything besides paying your niece $25.00 a month to pick up the trash around the office building? $25.00 x 12 = $300.00
8. Yes, the Christmas party for the clients. $1500 for the caterer, $480 for the wine, $230 for the flowers and decorations, and $350 for the Entertainment. Total $2780.00
The total amount of legal tax deductions listed above is over $5,000.00. Can you afford to lose $5000 worth of deductions?
When you arrived at the IRS office, you forgot about most of the above deductions…no problem because you had a GOOD Bookkeeper, and each month you scan your receipts, credit card statements, and checkbook register to her. The Bookkeeping Service provides Monthly reports as well as an Annual Report of your expenditures to your auditor. Maybe they even represented you with audit defense. You had nothing to worry about!
Oh, that’s not how it happened?
As it turns out, many small business owners do not keep up with ALL monthly expenditures. As a result, hundreds of dollars and, in some cases, thousands of dollars worth of legal tax deductions are lost.
Maintaining recording and scanning your receipts to your bookkeeper is a habit that can be developed. It is a habit that can reduce your tax liability tremendously.