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Are You a Small Business Tax Deduction Pro? Apply These 5 Tips and You Will Be
  • 17 January 2017
  • Eric Michaels

Are You a Small Business Tax Deduction Pro? Apply These 5 Tips and You Will Be

Launching a business involves more than just executing your ideas. After all, your business can quickly become a well-oiled machine that involves employees, expenses, vendors, and—last but not least—accountants. Among the things that terrify first-time business owners, tax concerns are probably near the top of the list. But paying your taxes does not have to be a scary or overwhelming process. Here are five tips that will help you become a tax deduction pro.

1. Separate work from play

When you are starting out and business is slow, it may feel like a hassle to separate your company transactions from your personal ones. However, when you go to file your taxes for the year, this separation will be critical. You may want to invest in a business credit card so that you can easily tell which expenses belong in each category. Just use this card whenever you need to buy things for work.

It may get tricky when you work from a home office and things like furniture get used for both work and personal purposes. In these types of scenarios, you should refer to your accountant for advice. By investing in a company phone, you can make some of these types of distinctions easier.

2. Invest your taxes

This tip may sound strange at first, but it is important to remember that spending on advice and technology could save you big down the line. For example, an accountant specializing in your field may be more expensive than your regular accountant, but this accountant's expertise could help you save more money when it is time to file your taxes.

3. Know your tax deduction list by heart

Accountants are usually surprised when they learn that their clients have not been taking deductions the IRS allows. Over the course of a year, small figures add up to the thousands, especially if your company is expensive to run. Depending on how you operate, you may be able to claim the following deductions at tax time:

  • Smartphone costs and plan
  • Start-up expenses (desks, computers, paint, etc.)
  • Bank fees
  • Entertainment
  • Coffee

The best time to learn about these types of deductions is before you start running your business, or shortly thereafter. Once you are in the thick of the busy season, you may forget about the small things.

4. Embrace automation

As a small business owner, you have to remember that your time is money. After all, you have to constantly juggle a slew of different responsibilities on a daily basis. As such, it is always a good idea to invest in any technology that can make certain processes easier and less time intensive.

Even if you are not a particularly tech savvy person, you could save time and reduce your stress level by purchasing an automated bookkeeping program. The best programs allow for integration with your bank card and instant expense logging. Some programs even have a feature that you can use to add a picture of a receipt from a smartphone app.

5. Keep up with IRS news

The IRS makes some small changes to tax codes and benefits from time to time. As a small business owner, you should keep up with news from Capitol Hill and the IRS. Some developments, including the amount of money that business owners can deduct when buying new equipment, can have a major influence on your purchases.

By following the tips outlined above, you can be one step closer to becoming a tax deduction pro. The earlier you start planning, the easier your life will be when it comes time to file your taxes.

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