Tax Deductions Archives - Number Nerd Bookkeeping Solutions

December 5, 2017

How & When to Give as a Business

This is the time of year when businesses start to give back–either through charitable donations or with gifts to their teams and clients.

Giving is a great way to reduce your tax burden, make a difference in someone else’s life and to say thank you to the people who have worked with you or for you throughout the year. There are so many ways and reasons that giving is a “win” for you as a business owner.

But there are also things to watch out for and consider before hitting the online shops with your credit card. Not all giving is made equal, and not every gift is a tax deduction.

I don’t think giving should be from the perspective of looking for a tax break, but rather something you can (and should) do throughout the year. It’s something you do because you’re called to do it or because you’re thinking about someone–not something you have to do, and at a certain price point.

So before you decide to grab gifts for anyone and everyone, or give away thousands because it might make you look good, have a good reason to give. And put some limits in place.

Make it part of your company culture

Many companies out there give as part of their culture. They donate their time, money and resources to organizations, bringing their employees along for the ride. This helps to strengthen teams company-wide while also getting employees more engaged in the business and community. Not only that, but people who give back have a deeper sense of fulfillment, making them happier employees (and therefore more productive).

Make giving part of your company culture, not something you just do once a year. Click To Tweet

Be conscious of how much you’re spending

Of course you’re not going over your budget when donating and gifting, right? It’s easy to let down your hair and spend a bit too much during the holiday season, but it’s important to plan in advance what you’ll spend for each person. Know what your overall budget is for clients and team members and then plan out gifting accordingly. A word of warning: The price of gifts should be comparable to either company standing or years of service. And know that team members will likely compare notes, especially if they all work under one roof.

Know tax limits before buying client gifts

As I mentioned, talking to your tax preparer should be your top priority if you’re planning to use your client gifts as tax deductions. The IRS only allows you to allocate a certain amount per client, and your CPA should be asking you about this. Don’t let tax breaks (or the lack thereof) stop you from giving though. One of the best things about giving is not expecting anything in return.

One of the best things about giving is not expecting something in return. Click To Tweet

As a business owner or decision-maker, it’s your personal preference that will make all the difference when choosing how and when to give back–to your team, your clients and your community. Be sure you’re doing it from the right mindset. It’s not about getting credit for helping, it’s about doing the right thing for the right people.

October 20, 2016

What? I Can Deduct That?

“You must spend money to make money.” – Titus Maccius Plautus

I don’t know many people who enjoy spending money. But it’s a necessary part of doing business. You need resources to be able to do your job well and to grow your business.

Investing in your business is important. Whether it’s a new phone, a course to help you grow as a business owner or a place to set up shop, your business expenses are tax deductible. And some deductions get forgotten because you’re not recording or categorizing them correctly (or at all!) or mistaking a business expense for a personal expense.

But many deductions go by the wayside because you may not be aware that you can deduct them. If you’re doing your own taxes (which I don’t recommend, especially if you own a business), be sure you’re keeping tabs of the following expenses. Your bank account will thank you, come tax time!

Health insurance – While there are rules that must be met, health insurance premiums are tax deductible for those who are self-employed.
Charitable donations – Whether it’s a donation directly to a qualifying charity or expenses you incurred as a result of volunteer service, you can deduct donations your business makes. You cannot, however, deduct the value of your time if you volunteer.
Cell phone – This is a tricky one. While you can deduct the cost of your cell phone (including both the purchase price and the monthly fee), this is true only for the portion used for business. So hang onto your phone records and talk to your accountant at tax time.
Home internet – If your business is home-based, it’s likely a necessity of doing business. You can deduct the cost of using internet for your business—but not the portion used for personal use.
Rent or mortgage – This is where those of us with a home office score! You can write off the portion of rent or mortgage you pay for the space you use for work. So if your home office is 100 square feet of your 1,000 square-foot house, you can write off 10 percent of your mortgage or rent payment.
Team meetings – This can be a tricky one, but if you’re hosting a meeting with team members, you can write off some of the expenses. Whether it’s meeting space, travel or refreshments during the meeting, you can generally write these off. But check with your accountant first.
Service fees – Any service you use for your business is deductible, including ATM and credit card fees, licensing, professional services and other service-based fees.
Travel – Another great perk of being a business owner is being able to write off travel. But be careful. Unless the travel is directly and solely related to your business (meeting with an out-of-state client, prospecting new business, etc.), you’re better off paying out of your own pocket.
CPA fees – If you own a business, it’s always a good idea to have an accountant on retainer. And they will let you know that their fees are all tax deductible.
Moving expenses – Do you have to relocate to service a client? Is your office moving? You can deduct the expenses that relate to your business. On a separate note, if your family moves to a new state that can be deductible too! Keep track of your mileage and expenses and be sure and let your CPA know.

It’s always important to track any expenses related to your business, regardless of if it’s a write-off or not. Tracking your business expenses helps you to budget and see where your money is going.

Unsure about a deduction? Always talk to your accountant before claiming something on your taxes.

April 18, 2016

Tax Deductions Businesses Forget to Take

It’s probably a safe bet that you have never uttered the phrase, “I can’t wait to do my taxes!”

If you’re a small business owner, the odds are likely even worse, but that’s OK because that makes this blog a really nice surprise for you.

However, tax time is your opportunity to make the best case for keeping the most of your hard-earned money. Especially if you own a business, there is money to be reclaimed by every taxpayer, if you know where to look. Fortunately for you, we won’t make you thumb through the 73,000-plus pages of the tax code. (Fun fact: this is 187 times longer than it was in 1913; well maybe that’s more horrifying than fun.)

I have often told clients about tracking expenses on things like cell phones, supplies and other expenses because they are qualifiable dedication, and the reaction is always “I had no idea!” That’s OK, it’s what I’m here for, and if the news makes you happy and I end up looking like a genius, my day is made.

So, with the tax deadline looming in about a week – surprise, it’s been extended to April 18th this year – you won’t have time to read the tax code anyway. Instead, let’s hit the most-often overlooked or misunderstood tax deductions, with the strong suggestion to employ a good tax accountant (who may have actually read the tax code).

Home office – even if it’s not an entire room dedicated to the sole purpose of your eventual domination in your chosen field, there’s a formula that you can apply to the space where you do business. However, be careful – if it’s on a computer that everyone uses and in a room that is where your parties are thrown, the IRS may shake its head at that. Feeling brave or curious? Read more about what the IRS says about the business use of your home.
Office supplies: here too, be careful. While you might overlook the multitude of purchases made for your home office that are deductible, keep them separate from your kids’ school supplies. Receipts can be tucked into an envelope and added up easily every quarter, or for the year end.
Electronic devices like smartphones and tablets can also carry deductions. More about that from the IRS (form 946) to clarify if you’re literally holding money in your hand.
The benefits of joining: Dues for the chamber of commerce, the weekly networking group that has a $5 fee for the door, a monthly fee for the online stock image subscription: all qualifiable for deductions as a business. The same goes for expenses on business-related classes and education.
Mileage/vehicle expenses: No matter the car you drive, if you drive it to meet a client, attend a business seminar, or are pitching a new client at their office, that’s money in the bank. You have a couple of options – keep track of the miles you drive for business (the 2015 calculation is 57.5 cents per mile), add parking fees, tolls and other related expenses, and then use it to arrive at your total deduction. The other option is to compare your business use against your total driving and deduct that portion of your auto-related expenses. Depreciation, and incidentals along your travels like lodging can also put more back in your pocket. Read more in the IRS’s Publication 463.
Health Insurance: For small businesses, health insurance premiums and related expenses are wholly deductible; couple that with the fact that you can be penalized for not carrying health insurance, and it’s a win-win. I’ve often heard from clients that they didn’t think they could get insurance if they weren’t an LLC. You can, and you should have insurance is the short answer. This is also an expense that I don’t allow whining about. If your business is that important, it needs protecting. End of discussion.
Hired hands: If you have employees, that’s one thing, but even when you don’t, you are likely paying someone, somewhere to help you conduct business. Attorneys, marketing professionals, printers to get you materials, and that tax professional we recommended you have all incur expenses that are deductible

Tax time can therefore be looked at as a treasure hunt, a reward for your efforts in the past year that allow you to take back a decent portion of what Uncle Sam says you owe.

Ultimately, the best advice to start with is when in doubt, track the expense. I often preach about saving yourself time with automated ways to track expenses because you just are too busy to do it all, however, even a shoebox full of receipts beats nothing in your hand. The worst that a tax preparer will tell you is no. It’s far better than to think about the money you could have saved, rather than giving it away needlessly.