Last week I gave you a few different ways you could track your business expenses. This week I want to offer you some guidelines on expenses or costs to your business that you can possibly write off for tax time.
I know, you are probably thinking, "Rebecca, I don't want guidelines. I want one stinking easy list that I can reference for my business expenses. Either it is on the list or it is not, period." I get it, believe me I do. As an accounting professional, I would love that too. Alas, I am sorry to tell you, that is not how this works. (Insert sad face here).
So, before you read any further, remember, I said these are guidelines and examples. Let me be clear, I am not a tax professional. If you have any questions regarding actual tax write offs for your physical business location, please consult your tax professional. (Disclaimer done.)
What can you, as a business owner "write off" for your business expenses? If you really want a detailed definition of what you can deduct, you can visit the IRS website. But, let us pretend you don't have a ton of time to read while running your business. Remember, the government changes the tax code year to year (this is so helpful, said nobody ever!)
Here is a short list:
Cost Of Goods Sold (items directly incurred to create the item you sell. IE, you sew dresses and sell them. The material you purchase to make the dresses are would be considered a Cost of Goods Sold item.)
Cost of Services Sold (same thing but instead of selling a tangible product, you sell a service. Example: you have a lawn care service and you purchase grass seed and dirt to start a lawn for your client. These are Cost of Services Sold.)
Advertising
Direct Labor Cost (including contributing to retirement plans)
Background Checks on Employees (goes under the above category)
Insurance (for business, not personal)
Taxes (yeah, you can write off various portions of previous taxes paid)
50% of Business Meals (with new rules in place)
Rent Expense (for a storefront aka brick and mortar location. If you work from your home, that is a different calculation and set of rules.)
Business Loans and Interest (PPP and EIDL programs may be different because of payback forgiveness)
Business Use Of Your (Personal) Car (there is a specific calculation for this)
Training or Education regarding your business or trade.
Bank Fees
Business Credit Card Fees and Interest
Equipment Rental (if you have to rent special equipment to perform your business service)
Office Supplies (stationery, printed material, printer ink, envelopes for mailing, etc.)
PPP- Personal Protection Gear (if your business requires safety gear for you or your employees to perform the business properly and safely.)
If your company is a corporation, there is a few other items you can deduction aka write off:
Company Owned Vehicles used for work
Company Owned Equipment
This list is by no means complete and is not inclusive of all possible business deductions. Here is another link to Publication 535, Business Expenses for more detailed information. (See, I told you there was no stinking easy list. I wasn't lying.)
I know this subject can be rather stressful for business owners. I am not only an accounting professional, but also a business owner, so I get it. The advice I can give you is to hire a professional. Whether you hire a bookkeeper like me to keep your accounting books up to date with your income and expenses, or you do your own bookkeeping and hire a tax professional for tax season is entirely up to you. Either way, you will be glad you left this insanity to the professionals!
If you have any questions regarding this subject or anything else with bookkeeping, please contact me at Rebecca@rhbizsolutions.com.
Here's To Your Success!
Rebecca Hurt
RH Business Solutions