Tax Help For Small Business Owners

The best tax help I, or anyone else for that matter, can offer you as a small business owner is with a piece of advice: organize all of your documents that pertain to your income tax as if you are preparing for a scheduled audit by the Internal Revenue Services (IRS). I am not saying that you will be audited but I am saying that you should, at all times, be prepared as if you might be. And if you are audited, more often than not, the auditing will zero in on claimed expenses. What do I mean by all that?

1. Keep all your receipts and canceled checks for your business expenses and have them organized in separate files in categories such as but not limited to the following:
- Auto (purchase, gas, mileage, maintenance, repairs)
- Rent (office and workshop space rental)
- Computer (purchase, service, software)
- Website (design, maintenance and service)
- Equipment (purchase of machinery and tools, maintenance, repair)
- Furniture (purchase, repair)
- Office supplies (ink cartridges, printing paper, stationery and business cards, pens, note pads, etc.)
- Telephone (purchase and service)
- Gas (usage)
- Electric (usage)
- Water (usage)
- Advertising (newspaper ads, trade magazines, etc.)
- Promotional items (give away nick-knacks)
- Travel (for business purposes via car, plane, train, bus)
- Professional fees (attorney, tax services, etc.)
- Business entertainment (power lunches, dinners, ball games, concerts, barbeques, clubs and more.)

2. Knowing or recognizing what is a tax deductible business expense is not always simple and clear cut. As a rule, any and all “ordinary, necessary and reasonable” expenses that are needed to run your business are tax deductible. You must, however, be sure that these are really used for the business and have not other use outside the business. Expenses such a bribe to a public official, a traffic ticket or a citation, a home telephone line and clothing, unless it is a required uniform, are not legitimate business tax deductions.

3. If you use your personal car for your business as well, be sure to keep an accurate log of mileage each time you use it for the business. This log must include the date, the miles traveled and the purpose of your travel. At the end of the year you can either calculate by multiplying the total mileage by 34.5 cents or by actually calculating the gas you used on these business trips, the repairs, and the car’s depreciation. Use whichever method benefits you most.

4. You can only claim fifty percent of the expenses that you have spent on clients or potential clients as business tax deductions. Exceptions to this rule are parties, picnics and other special social events that you put on for your employees and their families which are one hundred percent tax deductible. Keep a log of all your business entertainment events that includes dates, names of participants and their relationship to your business.

5. Expenses that include daily running of your business such as office supplies, rent and utilities can be fully deducted from your business income. However, expenses that will generate income, directly or indirectly, in the future (such as desks, copiers, computers and cars) can only be claimed by dividing their expense over a number of years or their useful life. According to the IRS rules, that period can be three, five or seven years.

May your small business prosper and thrive.

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