5 Money-Saving Tax Tips for Your Small Business

Calculating Taxes Up And Down
Image by: kenteegardin
By Josie Alexander

March means that most of the United States are frantically trying to file their taxes. I don’t know many people who enjoy this time of year – especially businesswomen. However, paying your taxes, doesn’t have to be that traumatic or expensive. I’ve talked with tax experts and researched these helpful tax tips for businesswomen who own their own businesses and for businesswomen who work from home.

You could be missing out on a lot of business deductions this tax season (and possibly prior seasons as well) because they just aren’t aware of them or because they can’t be bothered to itemize, or do the extra math. They’re busy enough as it is, why add to those headaches?

#1) Car Expenses

Okay, so there’s the standard mileage rate (which was 56.5 cents a mile last year). However, any expense that is for the “betterment of the vehicle” can also be written off as a business expense. That means tire changes, car washes, oil changes, and replacement parts as well.

#2) Work from Home

Businesswomen who work from home will find that they are at a major disadvantage when it comes to writing off mileage if they don’t claim their home office on their tax return. In the eyes of the IRS, if you don’t claim your home office as a work space, every trip from your home is a commute.

So how do you claim a home office? Well, this is the first tax filing season where you can claim a simplified home office deduction, which will be $5 for every square foot of home office. The claim tops out at $1500 (or 300 square feet).

You may be able to claim even more than that if you’re willing to do a little extra work. I’ve talked with a local CPA and she said that if you take the square feet of your home office and divide it by the total square footage of your house, you can apply that percentage to home-related expenses like your electricity bills to even a percentage of your mortgage. Of course, it will be one or the other, not both, so if you want to claim a percentage of your bills, crunch those numbers and compare it to the (easier) first method of $5 per square foot of office and see which number is bigger.

#3) You Can Go Back

You can go back and claim previously unclaimed expenses (even back to your start-up costs). Unfortunately, in order to do this, you need to have kept adequate records for it. For example, if you work from home and your home computer has now turned into your work computer (strictly for work), you can write off a percentage of that expense if you still have receipts and records for it.

#4) Organizing Expense Reports and Filing Away Receipts

Keeping a day planner or monthly calendar would be a great record to help you keep up with expenses. I suggest (if you’re willing to do the work to itemize your expenses), that you print out a monthly calendar and tape it to the front of a manila envelope. In that envelope, I suggest that you keep and record the receipts that correspond with the expenses that you’ve recorded on your calendar.

Of course, that’s the old school way. There are some great programs and tools out there if you want to keep a computerized version of your receipts that you can file away on your hard drive (with a back-up on an external hard drive). Always back up your work. If I’ve learned anything from being a writer that I can pass along to you, it would be to back-up all of your work.

One great program is called Expensify. First of all, this program is free (hooray). This program is available as an app for your mobile devices as well as for your desktop. You can also combine this program with Quickbooks (double win). You can scan in your receipts (or take a photo of them) that you can file away.

I’ve noticed that the mobile version seems to be very travel expense friendly. If you do a lot of traveling for your business (whether if it’s on a plane or in your car), this is a great program to have.

Another great app for keeping track of your business expenses is Xpenser. This program is great because you can use your phone to capture time, expenses, and reports. You can manage, search, submit, and print them through your computer. It will also allow you to import credit card transactions and put them in an expense report.

Even if you’re keeping virtual copies of your receipts and your expense reports, I would recommend filing away those manila envelopes just in case of an audit or if you are going to take your tax information, reports, and documents to a certified tax office to file to the IRS.

#5) Squirrel Away Money for Next Year

I know that most of you responsible businesswomen are already doing this but it is so important that I’m going to reiterate it for you. If you are a business-owner (whether if you are your own boss, independent contractor, or if you own your own small business with employees and a storefront), you need save money to pay your taxes every year.

I suggest creating a separate account (or even a savings account) that you put a percentage of your profit or paycheck into. 33% of your paycheck will be a safe percentage (and you will probably not use all of it for taxes). However, put that money in and don’t touch it. This will make next March less stressful.

As always, don’t take this as “official” tax advice. While I have talked with my local tax consultants for advice, she does not know your situation specifically. Contact your the IRS, your accountant, or tax adviser to get the scoop on your specific situation.

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