Small Business Tax Deductions
What to Keep This Year to Make Your BusinessTaxes Easier to Prepare
There are many important documents a small business owner should keep track of during the year to ensure that they are prepared for their taxes.
Tax time is a dreaded part of the year for most people, small business owners in particular. Unfortunately, the tax system in the U.S. is not something that can be called “user-friendly”. Therefore, it is generally best if a small business owner allows a tax professional or CPA that specializes in taxes to prepare their tax returns. However, to do the best job possible, the tax professional you choose will need certain documentation from the small business owner that is gathered throughout the year.
Receipts
Receipts, receipts, receipts! Keep the receipts you get for everything throughout the year, whether you think it will have bearing on your taxes at the end of the year or not. There are many less well-known tax write-offs that you may not be aware of that your accountant can use if you save that receipt. Keep receipts even for expenses that seem purely personal at the time as they may come in handy either with your personal return or they may be connected to a business expense at a later time.
Mileage Books
If you use your vehicle at all for your business make sure to keep detailed mileage records. Not all mileage can be used to reduce your taxes but, to be able to use the mileage that can be it is best if you keep a record for all mileage used on that vehicle throughout the year. Buy a mileage book or keep a simple notebook. Every time you use the vehicle jot down your starting mileage, where you started from and where you’re going, and your ending mileage once you reach each destination. Mileage can add up so make sure to keep accurate records. Also keep all gas and maintenance receipts if you use your vehicle for your small business.
Vehicle, Equipment, and Other Asset Information
Keeping solid records on your tangible assets is important for a small business throughout the year. Make sure to keep a record on everything from your vehicles to backhoes to fax machines. Note when and where the equipment was purchased, the purchase price, and any maintenance done to the equipment throughout the year. Make sure to keep track of all receipts associated with these assets as well.
Subcontractors
Keep solid records of when all subcontractors are retained and ensure you gather all needed tax information when they start working for you, rather than trying to call them all April 14th. Some of the most common information your tax professional will likely ask for include:
- Tax ID numbers or Social Security Numbers if they do not have TIN
- The business name or the subcontractor’s full legal name if they operate under their own name
- Their address and phone number
- The time frame the worked in and projects they worked on
Make sure to pay your subcontractors with checks, never cash. Cash is too difficult to track and you may not be able to write these payments off as easily in your taxes.
Tax Time
When preparing to take all of this information to your tax professional you can ensure that your visit goes more smoothly and may be less expensive by keeping everything organized. Keep your receipts separated in different folders for each category you can think of (or call ahead and find out what categories they prefer). You may be able to reduce your tax bill further by having a bookkeeper keep accurate records of your income and expenses in a small business software program such as QuickBooks.
Related Articles:
Section 179 Deductions: Maximize your Business Deductions
Protect Income with 1031Exchanges: Minimize Capital Gains Taxes by Planning for a Like-Kind Exchange
Bookkeeper, Accountant, or CPA
Management and Public Accounting
