Most small business owners are so busy managing their everyday businesses, that when tax season rolls around they just want to get the dreaded task out of the way as soon as possible. However, by not taking the time to thoroughly review all available deductible expenses, many end up paying Uncle Sam much more than his due. In today’s information age, tax tips for business owners are readily available and should be reviewed with a qualified consultant by every business owner looking to save money.
Knowing Is Saving
Many business owners who have needed to purchase a new vehicle, have at one time or another been made aware of the car expense deduction by a savvy auto salesman. Yet so many still do not obtain up-to-date tax information and remain completely oblivious to the many other deductible taxes that remain unclaimed each year. Significant savings could be realized if only such items were claimed as a home office tax deduction, such as property taxes.
Profit Gains Through Deductible Expenses
As every business owner knows, there are simply unavoidable costs that occur in the day-to-day operations of a business. Often, since the expense cannot be billed, there is no apparent direct profit that can be gained from these expenses. Nevertheless, the business would suffer losses if they were to be eliminated. One of the clearest examples of this is cleaning services.
Imagine for a moment a business that regularly receives customers, such as a hair salon. Each hairdresser has a steady flow of business and simply does not have time to dust, clean the bathrooms, or mop the floors. Yet, since appearances are important, especially when attracting new customers, cleaning services are hired and the salon’s employees are free to focus on their craft.
However, say for instance that the company was to go out of business and a new one, with the same conditions, could not be found for the currently budgeted amount. In order to stay on budget, the salon decides to reduce the number of days it receives services from every day to every-other-day. Although costs have not increased, a noticeable drop in walk-in customers has occurred because the salon simply does not present a well-maintained image. Since cleaning services are a deductible expense, the additional costs are regained not only by increased walk-in patronage, from a cleaner image, but also from the taxes saved. In short, the salon actually gains profit by spending money for deductible expenses.
Tax Tips for Business Owners Who Work From Home
As a result of e-commerce and e-services offered over the Internet, there has been an increasing trend in home businesses. Many are aware of deductible taxes and expenses but are confused about how to separate business costs from personal. Even with the numerous resources that provide tax tips for business owners, the whole process of itemizing can be overwhelming. This is where a qualified professional can help sift through many of the overlooked or more perplexing items such as a car expense deduction, property maintenance expenses, a home office tax deduction, property taxes, or various other deductible taxes. Even the dinner check or sponsoring your kid’s soccer team can be deducted if done properly.
For example, when brainstorming a new layout or product line for an online store, a meal can be claimed only if a client, customer or employee is entertained. As for the soccer team, the sponsorship needs to be in the form of advertisement, such as your company name on the uniforms. Also, remember that the car expense deduction, home office tax deduction, and the property taxes are all based on the percentages strictly used for business purposes.
In all instances, it is important to realize that the expense must be intended to benefit the business. Not all expenses are applicable but many are. Overlooking these can dramatically change a business’s bottom line. So take a closer look this year and consult a professional with any question you might have.
Author: Alicia Hill works as a senior account executive for Urban Outsource, a company providing professional cleaning services, based in Sydney, Australia. Though she is a blogging newbie, she couldn’t be happier to have an opportunity to write and share her mind.