If you have a business, you’re going to have to pay tax. There is simply no way around it. Whether or not you think that is fair, really doesn’t matter. Fair is a subjective term, and not one that the IRS recognizes. What matters, is that you comply with the legal rules and regulations that apply to your business and your industry.
If you haven’t given this area of your business much attention, you are likely paying more than you need to be. With a little bit of extra organization and some planning, however, you can make some significant savings, which is really just another way of saying more profit.
Let’s take a look at some of the ways in which you can save your business tax dollars, remain within your legal rights and help your business thrive.
Talk to the Experts
We may be biased in this regard, but the fact remains that an accountant on your taxes. This is their world, and they are trained experts. So why not take advantage of their expertise and the insider knowledge that you likely don’t have the time to explore?
A good accountant, one that you have built a relationship based on trust and integrity with, will actively look for ways in which to save your company on unnecessary expenses. He or she will guide and counsel you on best practices for your business, make you aware of regulations that apply to you, and develop efficient tax planning strategies customized for your particular needs and goals.
If you haven’t already, check out our other article where we outline some of the things to look for when choosing an accountant.
If your budget doesn’t currently allow you to hire an adviser, or you want to handle this aspect of your business yourself, we have some suggestions for you brave intrepid sorts as well.
Get Organized and Keep Track
We recommend using appropriate software to track all your expenses related to your business. There are plenty of phone apps available as well, and many of them are free. But make sure to keep all those original receipts in a safe and organized place, you will need them to prove your deductions should you be asked. You might be surprised how many things you can deduct, so keep a tidy paper trail and develop a system that will help you avoid misplaced documents.
By keeping a list of all of your job expenses during the year, you will be able to offset a great amount of your income. There are four areas we can touch on briefly.
Record Your Mileage
If you drive your vehicle for business purposes, you are eligible for a number of discounts at tax time. Keep an accurate mileage log and include dates, odometer readings, total miles driven and of course the purpose of your trip, and where you drove.
A great recommendation is to have your oil changed on the first of every year to obtain a third-party odometer reading.
There are a number of trips that can be included in your log including.
1.Traveling between offices or job sites
2. Running errands or picking up supplies
3. Driving to business meals (we’ll get to that in a moment)
Just remember that commuting is not always deductible. Click here for some more information
Record Your Meals
A good portion of these expenses can be written off when conducting business at the same time. Here’s a tip: when recording, classify meals for convenience of the employer separately, which are 100% deductible, from meals and entertainment, which are only 50% deductible. Ordered some pizza so the boys could work late? Christmas and staff parties? Those are meals of convenience of employer.
The same thing applies here as it does to your mileage. Keep track of these events and take care of the receipts.
Deduct Your Mobile Phone Costs
These can be a legitimate cost of business, and can thus be written off, so don’t make the mistake of overlooking this benefit. As with all things tax related, you have to be sure of the rules. We recommend getting an itemized phone bill so you can prove your deductions to the IRS if need be. It goes without saying that a game of Angry Birds isn’t deductible. Even if your IRS agent plays it on his break. Sorry, only business related calls.
Final Thoughts
Saving your business tax dollars is a rather large subject, and we’ve really only scratched the surface here. There are plenty of other opportunities to put tax savviness to work for you.
You can schedule us for a free meeting at any time to discuss this issue, or keep an eye out for other related blog posts to come.
As always, if you have any questions or comments, we would love to hear from you. And if there are any roaming CPAs out there with tips to share, please do so below!
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