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Author: Jake Snelson

Financial Records

How Long to Keep Financial Records

Have you ever wondered how long to keep financial records such as receipts, bank statements, and credit card bills? You’re not alone! Rather than keep everything forever and let the stacks of paper reach the ceiling, develop an organized system of keeping receipts for the recommended amount of time.

Remember, the IRS recommends keeping tax-related documents for at least six years. An audit can be performed up to six years after filing if an error is suspected, and you’ll want proof of your purchases if that happens.

How Long to Keep Financial Records and Why

Determining how long to keep financial records depends on several factors, including the record type and whether it’s for personal or business documentation. Whether you’re keeping the record for one month or 10 years, record-keeping best practices dictate you should store documents electronically (go paperless when you can), and always backup your files by saving them in the cloud. At Vyde, our accounting experts help our clients save and organize important financial information in a secure online portal so the information never gets lost and is easily accessible.


Below is a detailed summary of how long to keep financial records, categorized from the least amount of time to the most.

KeepItFor-01

1 Month

The key to successful record retention is staying organized. Set up an efficient monthly system and you’ll be more likely to stick with it. For instance, write the type of expense on each receipt and put it in a dedicated file each month. You’ll want to keep utility payment receipts, bank withdrawals, and deposit slips until you receive your monthly statements. After you’ve had time to review your statements, you can dispose of the receipts.  

Keep the following documents for one month:

  • Receipts for non-deductible items
  • Deposits / ATM slips
  • Reconciled bank statements

1-3 Years

You will need proof of payments and any business financial activity in case of disputes, identity theft, or fraud. Therefore, create a file for all banking and investment records for both your personal and business accounts. 

Keep the following documents for one to three years:

  • Paystubs
  • Bank records
  • Insurance policies
  • Investment statements
  • Mortgage statements
  • Receipts for charitable contributors
  • All business-related documents

7+ Years

You might be wondering how long to keep bank statements. Err on the side of caution. This will be helpful if you claim a loss or a bad debt deduction. 

Keep the following documents for seven or more years:

  • Income tax returns (federal and state)
  • W-2s and 1099s
  • Medical bills
  • Contracts
  • Receipts for tax-deductible items
  • Mileage records
  • Canceled checks
  • Real estate tax forms
  • Credit cards statements that contain purchases used as tax deductions
  • Retirement plan contributions

Forever

Why should you keep some items permanently? Some documentation has no expiration date, such as birth certificates and social security cards. Plus, these documents can serve as proof of identity. For paperwork like auto titles, or other purchases, store the related documents for as long as you own those items. 

Keep the following documents permanently:

  • Birth certificates
  • Social security cards
  • Passports
  • Education records
  • Auto titles
  • Investment statements
  • Home improvement receipts*
  • Receipts from major purchases*
  • Wills
  • Current insurance policies
  • Medical records
  • Pension / retirement contracts
  • Property agreements
  • IRA contribution records
  • Mortgage documents
  • Life insurance policies
  • Safe deposit box inventory

*for insurance purposes

Where to Store Your Financial Records

Where to Store Your Financial Records for Safekeeping

Keep vital personal documents, like birth certificates, passports, marriage certificates, etc., in a secure place, such as a home safe, fire-safe container, or a bank’s safe deposit box. 

Documents such as tax returns, receipts, bank statements, or pay stubs can also be kept in a safe deposit box or simply a locked file at home. For electronic documents, store them in a password-protected folder on your desktop or another secure location.

At Vyde, we help our clients save and organize important financial information in our secure online accounting portal. We not only complete your bookkeeping and taxes, but we also provide easy access to tax returns and other important business documents.

Why You Should Shred Discarded Documents

You may be tempted to toss old financial records in the trash. But if any of those documents contain sensitive personal information, like your account or social security numbers, you’ll want to shred them first. This reduces the risk of identity theft. 

Shred any document that contains:

  • Social Security numbers
  • Account numbers
  • Personal signatures
  • Birthdates
  • Phone numbers
  • Email addresses
  • Confidential information (medical, financial, or legal)

The Benefits of Record Keeping

Knowing how long to keep financial records is important because it can help you stay organized. This is crucial if you’re a business owner, as you’ll want to have everything readily available should you be audited or need to go to court. Organizing your records can also help you prepare accurate financial statements and tax returns, stay compliant, access important reports, apply for loans, and plan for the future. 

Vyde Can Help!

Need help organizing your business financial records? At Vyde, we can help with your business accounting and taxes. We’ll handle your books throughout the year so we can keep you organized and maximize your tax savings, all for a minimal monthly fee. Contact us today!

1. How long should I keep financial records for utility payments and bank transactions?

Maintain utility payment receipts, bank withdrawals, and deposit slips for at least one month. Review your monthly statements and dispose of these receipts afterward.

2. What financial records should I retain for one to three years?

Preserve documents like paystubs, bank records, insurance policies, investment and mortgage statements, receipts for charitable contributions, and all business-related documents for one to three years.

3. Which documents should I retain for seven or more years?

Keep income tax returns, W-2s, 1099s, medical bills, contracts, receipts for tax-deductible items, mileage records, canceled checks, real estate tax forms, and credit card statements used for tax deductions for seven or more years.

4. What documents should I keep permanently?

Essential documents like birth certificates, social security cards, passports, education and medical records, auto titles, investment statements, wills, insurance policies, property agreements, and certain receipts should be kept permanently.

5. Where should I store financial records for safekeeping?

Keep vital personal documents in a secure place at home or in a bank’s safe deposit box. For electronic documents, store them in a password-protected folder or secure location. Vyde offers a secure online portal for organizing and storing financial information.

Advertising Expenses

Top 20 Common Advertising Expenses Examples for Small Business Owners

Top 20 Common Advertising Expenses Examples for Small Business Owners

You’re probably spending a fair amount of money on advertising your small business to potential clients and customers. Did you know most of your marketing and advertising can be written off as a tax deduction to lower your tax bill? Whether you’ve got a whole marketing team running the show or you just purchased your first  ad, most money spent on promoting your small business is tax deductible.

According to the IRS, the criteria that your advertising expense must meet to qualify as a deduction is that it is ordinary (i.e. common and accepted in your industry) or necessary (i.e. helpful and appropriate for your business). Marketing and advertising are both essential to growing and promoting your business, which makes them ordinary and necessary.

Just because the IRS terms an advertising expense as “ordinary” doesn’t mean you can’t be creative when it comes to ways you advertise. As long as the purpose is to bring in new customers and keep existing ones, you should be covered. Just be sure you know and document the business purpose.

The few exceptions include expenses that are used primarily for personal use or gain, not business promotion. In addition, though donating products or money to a community event or charity are tax deductible, donating services or time are not. Again, be sure to know and be able to show how the expense benefits your business. When in doubt about a specific advertising expense and if it’s tax deductible, ask your accountant.

20 Common Tax-Deductible Advertising Expenses for Small Businesses

Here’s a list of the top 20 most common advertising expenses for small business owners to keep in mind come tax season. All of these are tax-deductible:

  1. Website set-up, design, and maintenance
  2. Pay-per-click ads and online advertisements (Google, Facebook, LinkedIn, YouTube, etc.)
  3. Social media promotions
  4. Promotional materials with your logo such as t-shirts, mugs, pens, notepads and more
  5. Graphic design fees: logos, business cards, brochures, signs, printed or online advertisements, flyers, or other promotional materials designed professionally
  6. Printing of promotional materials: business cards, flyers, postcards, brochures, and coupons
  7. Storefront signs
  8. Vehicle signs or vinyl decals for windows
  9. Giveaways and promotions
  10. Radio advertisements
  11. Magazine or newspaper advertisements
  12. Television commercials
  13. Balloons, decorations, refreshments, and any other expenses incurred for parties or open houses promoting your business
  14. SEO services
  15. Packaging, design, and materials for your products

Tax-Deductible Goodwill Advertising Expenses

Tax-Deductible Goodwill Advertising Expenses

The following are considered goodwill advertising expenses and are tax deductible as well. Goodwill advertising is any type of promotion that keeps your small business in the public eye.

16. Sponsoring a youth sports team in your community such as little league baseball or soccer

17. Money donated to a school, charity, or local cause

18. Participating in a parade to promote your business, such as handing out flyers, candy, frisbees, pens, or shirts

19. Giving away products or samples

20. Advertisements encouraging people to donate to a certain charity, like the Red Cross

Are you feeling overwhelmed by tax and bookkeeping tasks for your small business? Don’t let the stress get to you. Reach out to the tax experts at Vyde today. Vyde handles the paperwork so you can focus on what matters most—growing your business. Your own accounting department, all rolled into one. Don’t hesitate, contact Vyde now!

 

FAQs about Tax-Deductible Advertising Expenses for Small Businesses:

What qualifies as tax-deductible advertising expenses for my small business?

Advertising expenses must be ordinary and necessary for your industry. This includes various marketing efforts aimed at promoting your business.

Can I get creative with my advertising strategies and still claim them as deductions?

Yes, as long as your creative strategies aim to attract new customers or retain existing ones, they can be tax deductible. Ensure you document their business purpose.

Are there any exceptions to tax-deductible advertising expenses?

Expenses primarily for personal use or unrelated to business promotion aren’t deductible. Donating services or time is also non-deductible.

How can I determine if a specific advertising expense is tax deductible?

Consult with your accountant if uncertain about the deductibility of a particular expense. Ensure you can demonstrate how it benefits your business.

What are some examples of goodwill advertising expenses that are tax deductible?

Examples include sponsoring local sports teams, donating to schools or charities, participating in community events, giving away products or samples, and promoting charity donations.

Interested in Learning More?

Schedule a free consultation with our team!

Tax Extension

I’ve Filed a Tax Extension. What Now?

Tax day has come and gone and you didn’t have time to file your taxes. As long as you filed a tax extension, you have an extra six months to get your tax return to the Internal Revenue Service (IRS).

The IRS will allow you to file an extension for any reason, as long as you file form 4868 by the original tax deadline or they will automatically grant you an extension if you have paid your taxes by the original deadline.

But what happens after you’ve filed a tax extension? We’ll help guide you through the process.

IRS will allow you to file an extension

Check the status of your extension.

The first thing you need to do after you’ve filed a tax extension is make sure that it is approved. Although the IRS is good about granting tax extensions, you’ll want to double-check that yours has been approved. If you used an accountant to file your taxes, check back with them to see if it’s been approved. If you used a tax preparation service, you can check there to see your approval. Finally, if you mailed your extension form in, you’ll have to call the IRS customer service line to follow up on it.

Once you’ve verified that your tax extension was approved, you have six months to finish your taxes and submit them.

If your tax extension was rejected, it is most likely due to a clerical error. You may have misspelled something, or your last name doesn’t match the IRS’s records. If this is the case, you have 5 days to correct it and resubmit it.

Pay any taxes due.

Filing a tax extension does not extend the deadline for paying your taxes. If you owe any taxes, you need to pay them as soon as possible.

The IRS charges interest for any taxes not paid by the original due date.  After that date, unpaid taxes are charged a .5% interest rate for every month, or partial month, that the balance is not paid. The maximum penalty is 25% interest.

If you can prove that you had a reasonable cause for not paying your taxes by the deadline, then the IRS might waive the interest fees.

File your tax return.

The final step with a tax extension is to file your taxes. The IRS allows you to file a tax return up to 6 months past the original filing date. You can file your return any time before that date as well.

If you fail to file your tax return by the extended date, you can face more penalties. The IRS charges a 5% penalty for any month, or partial month, that your tax return is late. Again, the maximum penalty is 25%. You can avoid the penalty if you have a reasonable explanation as to why your return was late. The IRS suggests you attach your reasoning to your tax return in order for it to be considered.

If you have questions about your extension or business tax return, reach out to our team at Vyde. We would love to help answer your questions!

File your tax return

FAQs for Filing a Tax Extension

1. How do I confirm if my tax extension has been approved? After filing, verify approval status. Contact your tax preparer, service, or IRS customer service if you submitted it by mail to ensure it was accepted.

2. What should I do if my tax extension is rejected? A rejection could be due to errors. Correct any inaccuracies within 5 days, such as misspelling or discrepancies in personal data, and resubmit.

3. Is paying taxes postponed by filing an extension? No, the tax extension only extends the filing deadline, not the payment. Clear any owed taxes by the original due date to avoid interest charges.

4. When should I file my tax return after getting an extension? Utilize the granted six-month extension period to file your taxes. Submit your return within this timeframe to avoid late-filing penalties.

5. What penalties might I face if I fail to file by the extended deadline? Late filing incurs a 5% penalty per month on the unpaid tax amount. Attach a reasonable explanation if your return is late to avoid this penalty.

Financial Reports

What Your Financial Reports Really Tell You

 

Financial reports can be an incredibly helpful tool for small businesses. They can help you determine how much money you can pay yourself each month. Or they can help you decide if it’s time to expand your business. As helpful as financial reports are, they can only help you if you understand how to read them.

Luckily, Ben Sutton, Vyde’s co-founder and CPA, took the time to explain how an income statement and balance sheet work. It’s not the same as getting a 5-year accounting degree, but it’s going to give you the knowledge to make smart business decisions. Watch the video below for a great in-depth example of how financial reports work or keep reading to learn more.

Financial Reports Start with a Bank Statement

One of the things we ask our clients to send us each month is his or her business’ bank statement. This is so that we can begin to build your profit and loss, or income statement, and balance sheet. We’ll go through the bank statement to look for expenses and income. Expenses can come from a variety of places such as:

  • Marketing costs
  • Supplies
  • Food & entertainment
  • Business equipment
  • Auto expenses
  • Loan payments
  • Owner distributions

Income is simply what money your business generates. Customer payments are the most common form of income.

Keep in mind that as we move on these expenses will be split between the profit and loss statement and balance sheet. This is where the accounting rules come in. An accountant can determine what pieces of information belong on a profit and loss statement and what belongs on a balance sheet.

What Does My Profit & Loss Statement Tell Me?

A profit and loss statement (P&L) shows the revenues, costs, and expenses for a certain time period. We like to provide our clients with a monthly or quarterly P&L statement.

The P&L is only going to show the exact income and expenses that your business had that month. Accounting rules tell us which expenses belong on the P&L and what belongs on the balance sheet.

First, you will count any income your business had. Customer payments, as we said before, count as income. One confusing point would be any loans that you have taken out during the month. It may seem like income because money is coming into your account, but it isn’t. A loan is a liability and doesn’t belong on a P&L

Before we move on to regular expenses, we’ll want to look for the cost of goods sold. Cost of goods sold is what you spend on items that are required to produce your business’ services or products. This isn’t a required section on a P&L, but it’s useful for management to see what they’re spending directly on their services.

Next, are the monthly business expenses. Expenses are any other purchases that you make for your business. These include food, entertainment costs, auto expenses, and marketing costs. Some of the other expenses we listed in the first section aren’t part of the P&L. For example, business equipment and owner’s distributions aren’t part of the P&L. They are part of the balance sheet.

Once you have determined the income, the cost of goods sold, and the expenses, you total that to determine if you have a net loss or a net gain for the month. The P&L isn’t going to tell you how much money you have left in the bank. It’s simply telling you if you spent more than you brought in that month.

What Can I Learn From a Balance Sheet?

A balance sheet gives a company a quick glimpse at its assets, liabilities, and equity. The balance sheet will be broken down into those three categories: assets, liabilities, and equity.

The assets section starts with how much cash your business has on hand. Then you list your physical assets. If you bought equipment for your business during the month, like a computer or other purchases generally over $2,500, they go in the fixed assets category. To determine your total assets, you add your cash with your fixed assets.

Next, we’re going to go through our liabilities. Liabilities refer to money that we owe and include business loans, credit cards, auto loans, and more. After we’ve determined your business’ liabilities, we can move onto equity.

Equity is usually the most complicated part of the balance sheet. In the equity section, you’ll enter your owner’s distribution, or what you paid yourself that month. You’ll also see your retained earnings. The retained earnings are calculated by either adding the month’s net income or subtracting the month’s net losses from the last month’s total retained earnings.

Finally, you’ll add your liabilities and equity together. If you’ve done everything correctly, it should add to the same amount as your assets. That’s why it’s called a balance sheet. Because your assets should always equal your liability and equity.

Why Do I Need to Understand My Financial Reports?

Before we address the conclusions you can draw from your financial reports, we want you to understand how the P&L differs from the balance sheets. The P&L shows a period of time. Whereas, the balance sheet shows a point in time. So, the P&L can show you what you made, or lost, in your business in one month, and the balance sheet shows you overall where your business is at the end of the month.

Lesson 1: Don’t Manage Your Business Off of the Cash Balance. Manage it Off of the P&L.  

Without looking at both the P&L and the balance sheet, you can’t make smart business decisions. If you just look at the balance sheet, you may see that your business still has money, so you may try to pay yourself more, or make a big purchase. However, if you see that your P&L shows a net loss for the month, you might hold off on those decisions. The two go hand in hand when it comes to making a decision. You have to look at both to get an idea of where your business is truly at.

Lesson 2: Don’t Estimate Your Tax Liability on Your Owner’s Distribution  

Your financial reports are also going to give you an idea of what you owe in taxes. The biggest misconception small business owners have is that they are taxed on whatever money they pull out of the business, the owner’s distribution we’ve talked about. However, this isn’t true. The Internal Revenue Service (IRS) actually taxes you on your business’ net income. The IRS isn’t going to tax you unless you’ve made a profit on your business. In order to determine your net income, you’ll want to look at those income statements (the P&L) and determine if you had a net profit or loss. Once you know that, you can determine your tax liability.

I know the process can seem overwhelming at times, but analyzing both your P&L and balance sheet regularly can help you better manage and grow your business. If you are struggling to stay on top of your accounting and finances, reach out to our team at Vyde to see how we can help!

 
Quarterly Estimated Taxes

What You Need to Know About Quarterly Estimated Taxes

If you are self-employed or a contract worker and you are generating a profit, you may need to pay estimated quarterly taxes. This is the Internal Revenue Service’s (IRS) way of collecting taxes from people who don’t have them withheld from their paychecks through payroll.

Our guide on estimated quarterly taxes will help you understand who needs to pay them, how to calculate them, and how to pay your quarterly taxes.

If you have questions about estimated quarterly taxes or need help calculating how much you should pay, our team would love to help! Our clients can easily schedule a time to meet with us to discuss your unique situation.

Who Needs to Pay Estimated Quarterly Taxes

Most people pay their taxes throughout the year by having them withheld from their paychecks. When you are self-employed, however, you pay estimated quarterly taxes to cover those taxes.

Self-employed individuals, including contract workers, sole proprietors, LLC owners, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe $1,000 or more in taxes when their return is filed.

This means if your new business is not yet making a profit, you do not need to make estimated quarterly tax payments.

There are cases when you may have to pay estimated quarterly taxes even if you are employed and your employer is taking your taxes out for you. If you receive income from the following categories you may have to pay estimated quarterly taxes.

  • Interest
  • Dividends
  • Alimony
  • Capital Gains
  • Prizes or awards

Calculating Estimated Taxes

Quarterly estimated tax payments are based on estimations of what a business owner believes they will make in a quarter. Taxpayers estimate their income and their deductions in order to calculate the estimated quarterly taxes.

The IRS suggests using your previous year’s income and deductions to help calculate this year’s estimated taxes. They also provide an IRS’ Estimated Tax Worksheet on form 1040-ES to help you calculate your taxes.

The important thing to remember with quarterly estimated taxes is that they are estimates. If you over or under-estimate your taxes, you can file another form with the IRS to fix those taxes. If you make more or less income than you anticipated, you can also refigure your estimates for the next quarter so that you aren’t always over or under-estimating your taxes. Make sure you’re doing your best to make accurate estimates so you can avoid potential penalties.

Estimated Quarterly Tax Deadlines

For 2023, the Estimated Quarterly Tax due dates are:

  • 1st Quarter – April 18, 2023
  • 2nd Quarter – June 15, 2023
  • 3rd quarter – September 15, 2023
  • 4th Quarter – January 16, 2024

Be sure to save these dates in your calendar and set reminders so you don’t miss the deadlines. 

How to Submit Your Taxes

You can submit your taxes online through the IRS’ secure server. You’ll have multiple options to make your payments, including credit or debit card, cash, PayPal, money wire, and more. You can also access options to schedule future payments through the Electronic Federal Tax Payment System (EFTPS).

 

Estimated Quarterly Tax Penalties

If you do not make estimated quarterly tax payments or do not pay enough tax throughout the year, you may have to pay a penalty. Generally, if you owe less than $1,000 in tax or if you paid at least 90% of the tax for the current year, you can avoid any penalties. Again, quarterly estimated taxes are just that: estimates. Do your best and make adjustments as you go to avoid additional costs.

How Vyde Can Help

If you have questions about estimated quarterly taxes or need help calculating how much you should pay, our team at Vyde would love to help! Our clients can easily schedule a time to meet with an accountant and tax professional to discuss your unique situation. Simply reach out to our team through the Vyde Dash. We look forward to hearing from you!

Mazuma Announces $10K Giveaway Winner, New Competition for 2022

After a tight competition that included nearly 300 small business owners, Mazuma USA is thrilled to announce the winner of our first-ever $10K giveaway: Bruce Bassi, founder of TelepsychHealth.

Bruce BassiDr. Bassi started TelepsychHealth in 2018 to improve access to mental health services, providing patients with the resources, support, and help they need when and where they need it. Dr. Bassi’s goal is to improve the patient experience in a continuously changing industry. 

“There are a lot of people out there in a lot of pain and suffering, isolated and alone, and they need a lot of help,” Dr. Bassi says. “They don’t want to focus on the challenges of finding a provider and paying for a session. They just want to get better.”

About winning the $10,000 grand prize, Dr. Bassi says, “We will set this money aside in an account to fund services for low income individuals who need care but cannot afford it. Being able to see low income patients will greatly aid our mission of providing highest quality care to those who need it the most.”

Brandon LunsfordThe runner up for the competition was Brandon Lunsford, owner of Garden Of Eden Floral and Tea Room. Lunsford says his family is in the business of “delivering smiles” and helping people celebrate memorable moments, and he plans to use his $1,000 prize to expand his business.

Mazuma USA launched their $10K giveaway to bolster small businesses making a positive impact in their community. The top six finalists in the competition were featured on our Keep Going podcast as we celebrated their stories of hard work and success.

More than 10,000 people rallied behind these businesses, casting their votes to determine who should win the grand prize.

“We were overwhelmed with the response and thrilled to see so many people supporting and rallying around small business owners,” says Greg Nielson, Mazuma USA co-founder.

“Thank you to all who participated in our giveaway,” adds Ben Sutton, Mazuma co-founder. “We are excited to announce that we will be launching another $10,000 giveaway this year, and we will continue to celebrate the real-life struggles and successes of entrepreneurs in our Keep Going podcast.”

For details on how to apply for Mazuma’s 2022 giveaway, visit mazumausa.com/contest.

To listen to the remarkable stories of business owners like Bruce Bassi and Brandon Lunsford, visit mazumausa.com/keep-going.

21 Tax Benefits of Owning a Small Business

21 Tax Benefits of Owning a Small Business

21 Tax Benefits of Owning a Small Business

Many obvious perks come with owning your own business, including setting your own schedule, being your own boss, and having control over your career. But there are also many tax benefits business owners that can take advantage of to maximize their profits.
Here's a quick guide that covers important tax deductions for your business.

What Will a Deduction Save Me?

A deduction, or write-off, is a business expense that can help lower your taxes. For example, if your business made $75,000 last year but you invested $10,000 in new business equipment, you would deduct that $10,000 from your net income. That means when it comes time to pay your taxes, you would need to pay tax on only $65,000 instead of the full $75,000.

How much will that deduction actually save you on your taxes? It’s important to weigh out the costs versus tax savings when you’re making a business purchase. Sometimes the tax benefits of owning a business don’t outweigh the expenses involved with a deduction. Luckily, we have a simple formula that can help you see the value of these deductions:

Business Expense x Tax Rate = Money You Save on Taxes

For example, if you spent $2,000 on a new camera for your business and your tax rate is 25%, your savings would be $500:

$2,000 X .25 = $500

If you don’t know your tax rate, you can always visit IRS.gov to see the latest tax rates and brackets for the year. Keep in mind that if you are self-employed, you will also need to pay self-employment tax, which is a little over 15%.

Of course, you can’t write off every expense as a business expense. According to the IRS, you should write off expenses that are ordinary (i.e. common and accepted in your industry) or necessary (i.e. helpful and appropriate for your business). That doesn’t mean you can’t be creative regarding a tax deduction. Think broad. Just be sure you know and document the business purpose.

Common Business Expenses That Qualify For Tax Deductions

A great example of getting creative in maximizing your tax benefits for owning a business comes from a client I work with who wrote off her houseboat at Lake Powell. She is a photographer who takes senior graduation photos, and she also loves Lake Powell.

She came up with a promotional idea of taking a handful of her clients down to Lake Powell each year for an exclusive photo shoot. Because of these promotional trips, she decided to purchase a houseboat as a business expense. While she can still enjoy the houseboat throughout the year with her friends and family, the reason for purchasing the boat was to grow her business, which makes it a business expense. The chance to win a vacation to Lake Powell and the stunning photos that result from these trips help build her client base and generate more revenue. Overall, it’s a win-win!

This example illustrates that business owners should not feel limited in the deductions they take. Below, I have listed several common business expenses you should consider as tax deductions, but this is by no means a comprehensive list.

  1. Business Travel

  2. Business Meals

    • These include meals where you discuss business or meet with clients, partners, prospects, etc.

  3. Retirement Contributions

    • Business owners have more flexibility that allows them to strategize around their retirement contributions. At the end of the year, you can determine how much you want to contribute to your retirement to help lower your taxable income. If you have questions, reach out to our team to develop with the best game plan.

  4. Vehicles and Transportation

    • This can include purchases, leases, mileage, repairs, maintenance, insurance, etc. As we saw from the example above, it can even include houseboats!

  5. Phones

    • This can include the initial purchase, repairs, and monthly phone bills.

  6. Equipment

    • Some examples include tools, furniture, cameras, computers, monitors, printers, and machinery. Again, this can be broad depending on your business needs, so don’t limit yourself.

  7. Depreciation on Assets

    Depreciation on any capital under your name is fully deductible. Equipment, rentals, vehicles, and other depreciable items of contention are covered under a Section 179 deduction—up to $1,050,000 from new.

  8. Inventory

    One of the tax benefits of owning a business is that everything in your warehouse can be written off at the end of the year. This will be valid whether you’re producing these goods yourself or serving as a middleman.

  9. Supplies

    • Do you need office supplies or marketing materials like brochures, business cards, or posters? What about cleaning supplies or hardware like memory drives, routers, or servers? Keep track of all these expenses because they are all great tax deductions.

  10. Employee Expenses or Contract Labor

    • Whether you have employees or pay someone to help set up your office or website, you can count those payments as a deduction. In addition, any money you spend on business equipment, education, travel, meals, gifts, etc. for employees can be written off.

  11. Insurance

    • This includes health insurance as well as business-related insurance expenses, such as data breach insurance, liability insurance, property insurance, etc.

  12. Financing

    • If you finance expensive equipment, vehicles, or more for your business, you can write off the full purchase price of the asset using bonus depreciation in the year you financed it, even though it might take you years to pay off

  13. Website and Software

    • Are you paying to maintain your website or domain? Do you use editing software, subscriptions, or Microsoft products for your business? Make sure you write those expenses off!

  14. Education

    • Say there’s a seminar, class, or workshop that could help you gain important skills for your business. Take advantage of the learning opportunity and then take advantage of the tax deductions by writing off the expenses related to that education. That includes books, travel to and from seminars, meals purchased while attending a workshop, etc.

  15. Taxes

    • Since you are self-employed, you will need to pay self-employment tax, which covers Medicare and Social Security taxes and is roughly 15%. While there’s nothing fun about paying extra taxes, you can deduct half of the self-employment tax to lower your tax bill.

  16. Marketing and Advertising

    • This is another great area for thinking outside the box. You’ll likely have expenses related to ads, signs, logos, brochures, etc. but you could also sponsor community events, host a client retreat, or hold a promotional treasure hunt to build up your business.

  17. Home Office or Rent

    • Whether you rent an office space or work from home, you can take advantage of tax deductions. With rent, it’s easy to calculate your business expense because you have a monthly bill. For a home office, that can get a little trickier. Check out our guide for getting the most from your home office tax deduction.

  18. Utility Costs

    One of the significant tax benefits of owning a business: Every single one of the utilities required to keep you in operation is totally tax-deductible. The only limitation? Double services—if you have a dedicated phone line for your business on-site, you can’t also claim this same deduction for your home line.

  19. Interest

    Any interest accrued on a small business loan, credit cards, or other borrowed money your business depends on can also be written off. As long as you, the owner, are legally liable for the debt, you should be good to go, making this one of the best tax benefits of owning a business.

  20. Internet, Phone, and Other Bills

    • Water, heat, air conditioning, internet, phone, hotspots, monthly subscriptions for marketing tools or video conferencing—these could all be important for your business to function. Don’t forget to add those as tax write-offs.

  21. Professional Fees

    • Do you have to maintain a license for your job? Or do you need permits to operate? Those are additional tax deductions you’ll want to take advantage of.

owning a business

More Questions About Tax Benefits of Owning a Business?

Have additional questions about how to write off your business expenses and the tax benefits of owning a business? Reach out to our team for advice. At Vyde, we help small businesses save time, money, and stress by staying on top of their taxes and finances. We’d love to help you in any way we can.

Interested in Learning More?

Schedule a free consultation with our team!

Halloween Candy

5 Ways to Make Halloween Candy Tax-Deductible

Did you know you can deduct Halloween candy from your taxes? As a business, you can use Halloween candy as a tax write-off if you figure out a way to make it business-related.

Here are five ways on how to make Halloween candy tax-deductible this October:

  1. Make a promotion out of it. Attach your business card or a promotional flyer to packets of M&M’s and voila! Deductible.
  2. There are many companies that will print candy wrappers with your logo on it. This is a more advanced way to promote your business and still have something for trick-or-treaters.
  3. Send a box of candy to potential or existing clients this October. These gifts help promote your business and build relationships that can boost your sales. It might also be a nice, unexpected (and early!) surprise for clients who might be expecting a Christmas card rather than a Halloween treat.
  4. Donate any leftover candy to the US troops. Read more about that, here. “Charitable organizations with 501(3)c status like Operation Gratitude (EIN 20-0103575) and Soldiers’ Angels (EIN 20-0583415) collect leftover Halloween candy to include in care packages for soldiers. They are two of many 501(c)3 organizations on the IRS-approved list to donate tax-deductible charitable goods. Always be sure to check the IRS list before claiming your donations are tax-deductible, as status can change.”
  5. Make it a party. You can deduct a portion of a Halloween party if the party is to conduct or promote business. Typically, this looks like an open house of some sort where you mingle with current and potential clients, play a few Halloween games, give out candy and treats, and discuss business. The IRS does not specify how much time you must spend discussing the business to claim a deduction, so party on!

 

The candy you purchase to stand at your front door and hand out to neighborhood kids is likely not tax-deductible. But hey, those little smiling monsters on your doorstep are worth the money, aren’t they

Small Business Payroll 101 The W-2 Explained

Do I Need a Bookkeeper? 5 Signs Your Business Needs a Professional Bookkeeper

Entrepreneurs and small business owners are good at wearing multiple hats. They’re the marketing department, the production assistant, the CEO, the customer service rep, and much more. If you’ve been in business long, odds are you’ve learned quite a bit about finances (or you want to) and you might have even gotten pretty savvy at handling your books. However, doing it all starts to wear on you eventually, and it can even impact the growth and success of your business. Many entrepreneurs ask themselves the simple question, “How do I know when I need to hire a professional bookkeeper?” 

Need a Professional Bookkeeper

Do I Need a Professional Bookkeeper?

A bookkeeper does the day-to-day, hands-on tasks so you won’t have to. If you’re asking yourself, “why should I hire a professional bookkeeper?”, consider all the tasks they would take care of for you. Make sure new employees file all the right paperwork for the business’s payroll, promptly submit and follow up on invoices, and pay bills. That’s just the tip of the iceberg.

Though you may still be at a point where you can handle all of that, so let us give you the warning signs of when you should finally tell yourself, “I do need a professional bookkeeper, this is too much.”

Here are a few tips on how to know when to stop doing it yourself and start giving it to a professional bookkeeper. If you find yourself nodding your head in agreement with what you read below, let’s talk. We’d love to learn about your business and see if our services would be a good match.

It Might Be Time to Hire a Professional Bookkeeper If. . 

1. Your Books Are Never up to Date

We get that it’s hard to sit down and wade through the paperwork that makes up your company’s finances. But if your books aren’t up to date, you can’t be financially aware of where your business stands. That means you’re operating more on risk than you have to. Knowledge is power. Having your books up to date means you have the information you need to gauge the current health of your business and make smart, data-informed decisions.

2. Bookkeeping and Finances Take Up Too Much of Your Time

Running your business means you’ve got to keep tabs on a lot of different moving parts. We’re always impressed with the entrepreneurs and small business owners we work with; they can manage a lot. But it’s not worth running yourself into the ground and losing your passion for your business. According to a report by Sage, small businesses spend an average of 120 working days per year on administrative tasks. Another study found that a majority of entrepreneurs say the administrative burden of managing federal taxes is worse than actually paying taxes.

If you’re finding that you’re spending more time in areas that you don’t love (say the bookkeeping and invoices) and less time doing what got you started in the first place (customer service or creating your products), then it might be time to admit to yourself that “I do need to hire a bookkeeper”, and hand it over to a professional.

Look online to see what options are available. Be sure to take into consideration pricing and fees. There are many affordable solutions that can help you handle your bookkeeping and taxes for a flat monthly fee. You’ll have a better handle on what it might cost to hand your bookkeeping over to someone else and you’ll also know what you’ll be able to gain from using their services as well. That’s a win!

You don't know what your cash flow is

3. You Don’t Know What Your Cash Flow Is

If you’re still saying to yourself, “I still don’t see why I need to hire a bookkeeper”, there are two words to change your mind: cash flow. Cash flow is how much money you have moving in and out of your business at any given time. Knowing that number means you’ve got a good handle on the success and potential of your business. You’re aware of how much you’re spending and earning, and you’re keeping tabs on bills you need to pay as well as invoices you’ve sent out that need payment.

With a professional bookkeeper keeping track of your finances, you should have access to your cash flow number at any time. That might not be the case if you’re doing your books yourself or if they’re not currently up to date. Not knowing where you stand financially might not be hurting you, but it’s not helping you grow your business. A professional bookkeeper will provide you with financial reports and data that are essential to strategically expanding your business.

If you’re looking for a reason as to why you should hire a bookkeeper, bookkeeping is it. The time and resources saved by constant bookkeeping and detailed records are invaluable.

4. You Handle Your Books at the Same Time You Handle Your Taxes

Here are a few reasons you should consider doing your bookkeeping throughout the year, instead of during tax season:

  • Accountants or CPAs usually charge more per hour than a bookkeeper does. That means you’re paying more for them to do a task that could cost you more than half that much.
  • Books that aren’t up to date aren’t helping you make good business decisions and that means you’re taking more risks in your business. Having quarterly or monthly financial statements at your disposal means you can quickly track how your business decisions impact your bottom line.
  • Accountants who do retroactive bookkeeping don’t always provide you with month-to-month records. These detailed records are often necessary to secure loans, or attract investors, not to mention help showcase the value of your business if you’re looking to sell.

5. Your Sales Have Increased, You’re Busier Than Ever, but You Aren’t Making More Money

It happens more than you might think. Your business is growing, you’re busier than ever, but your net income is not growing or it’s tied up so you can’t invest it back into your business or pay it out to yourself or your employees. If your revenue is increasing but your bottom line doesn’t seem to budge that means you need to increase your profit margins.

The documents and reports that you’d receive from a bookkeeper will help show you where to cut costs so you can make your business more profitable.

For more details about profit margins and other numbers you should track as a business owner, watch this helpful video:

Do I REALLY Need to Hire a Bookkeeper?

The answer is, at the end of all this, it’s up to you. If you feel confident in your skills at managing all of those tasks for your small business, perhaps not. However, we strongly suggest not taking those signs lightly as, if left unchecked, they can leave huge negative impacts on your business. It’s better to ask the question, “Why should I hire a bookkeeper? Is it worth it?” than “Why didn’t I hire a bookkeeper? It would have been worth it!”.

If you have questions or are looking for bookkeeping solutions, we’d love to chat about your business. We’re here to help!

FAQs about Hiring a Professional Bookkeeper

1. Why should I consider hiring a professional bookkeeper for my business?

A professional bookkeeper can handle day-to-day financial tasks, such as payroll, invoicing, and bill payments, allowing you to focus on core business activities. They provide timely, accurate financial records crucial for making informed decisions, improving financial awareness, and managing risk effectively.

2. How do I know when it’s time to hire a professional bookkeeper?

Several signs indicate the need for a bookkeeper:

  • If your books are consistently not up to date, hindering your financial awareness.
  • When bookkeeping consumes excessive time that could be better utilized in core business functions.
  • If you lack a clear understanding of your cash flow, impacting your ability to gauge business success.
  • When handling books simultaneously with tax preparation becomes overwhelming and affects business decisions.
  • If sales are increasing, but your net income remains stagnant, indicating a need for profit margin analysis.

3. What benefits can I expect from hiring a professional bookkeeper?

By hiring a bookkeeper, you gain access to organized financial records, allowing you to make informed decisions, understand cash flow, and track business performance more effectively. Moreover, it can potentially save costs compared to hiring accountants for similar tasks.

4. How can a professional bookkeeper help improve my business’s profitability?

Bookkeepers offer detailed reports that enable you to identify areas to cut costs, enhance profit margins, and reinvest earnings back into the business. Their insights can guide strategic decision-making for sustainable growth.

5. What happens if I delay hiring a bookkeeper for my business?

Delaying hiring a bookkeeper may lead to financial disorganization, reduced awareness of the business’s financial health, missed growth opportunities, increased risk due to inadequate financial tracking, and potential difficulties in securing loans or attracting investors.

Is Office Furniture Tax Deductible

Is Office Furniture Tax Deductible?

Is Office Furniture Tax Deductible?

Furnishing an office is a necessary but expensive endeavor. Purchasing furniture for your office will make you wonder, is office furniture tax deductible? The Internal Revenue Service (IRS) understands that office furniture is a vital aspect of running a business, so they allow business owners to deduct those expenses from their taxable income.

What Office Furniture is Tax Deductible?

There are rules when it comes to deducting office furniture. First, the IRS only allows you to deduct $5,000 worth of furniture if you are just starting your business. Anything more could be considered capital costs. You also can only deduct furniture that is necessary and that is actually used in your business. This means it’s best that your office furniture stays at your office. You shouldn’t be buying something personal and writing it off as a business expense.

The following items can be claimed as office furniture or equipment expenses:

  • Desks
  • Chairs or couches
  • Coffee tables
  • Tables
  • Appliances (like refrigerators, microwaves, etc.)
  • Computers
  • Printers
  • Decorations
  • Phones
  • Televisions
  • Monitors
  • Speakers

This is not a comprehensive list. What qualifies as necessary furniture for your business depends on your industry, products, and services. If you are wondering if certain office furniture is tax deductible, ask yourself:

  • Is the item necessary for me to successfully run or grow my business?
  • Is the item something most businesses in my industry would need to function or operate?

If you answered yes to both questions, you can deduct the item from your taxable income. If you have specific questions about deducting office furniture, ask your accountant and they can determine what qualifies and how to categorize an item.

For more business write-offs you will want to take advantage of, check out “17 Tax Benefits You Can Take Advantage of as a Small Business Owner.“

Home Office Expenses

A lot of small business owners work out of their homes instead of an actual office. The IRS still allows business owners to write off their home office expenses.

If you’re working out of your home, you can claim the part of your house that you work in as your office. This means that you can write off part of your mortgage or rent as a business expense. You should calculate the square footage of your office and subtract that from the total square footage of your house to decide how much of your mortgage or rent you can write off. If you choose to write off your home office, it’s best practice to only use that space as an office. If you have other uses for the room then it’s not deductible.

You can also write off other normal business costs associated with using your home like trash removal, electric and heating, internet, snow removal, and other minimal repairs to your home that would affect your business. One thing you can’t include as part of your home office is a bathroom.

The office furniture rules apply to home offices as well, so if it is strictly used in your office, that office furniture is tax deductible.

If you have any questions or need help with your business accounting and taxes, reach out to our team! We would love to help you any way we can!

What Office Furniture is Tax Deductible

Frequently Asked Questions

Is office furniture tax deductible when starting a new business?

Yes, office furniture is tax deductible for new businesses, but there are limits. The IRS allows you to deduct up to $5,000 worth of office furniture in your first year. Any amount above this may be considered a capital cost, which requires different handling.

What types of office furniture can I deduct as business expenses?

You can deduct various types of office furniture and equipment, including desks, chairs, couches, coffee tables, tables, appliances (like refrigerators and microwaves), computers, printers, decorations, phones, televisions, monitors, and speakers. However, the furniture must be necessary for your business operations.

Can I deduct office furniture that I use both at home and in my office?

Office furniture must be used strictly for business purposes to be deductible. If you work from home, you can deduct furniture in your home office as long as the space is used exclusively for business. Personal items or furniture used for non-business purposes are not deductible.

How do I determine if an office furniture item is tax deductible?

To determine if an office furniture item is tax deductible, ask yourself: 1) Is the item necessary for successfully running or growing my business? 2) Is the item something most businesses in my industry would need to function? If you answer “yes” to both questions, the item is likely deductible. Consult with your accountant for specific guidance.

Are home office expenses, including furniture, deductible?

Yes, if you have a home office used exclusively for business, you can deduct related expenses. This includes a portion of your mortgage or rent based on the office’s square footage relative to your home. You can also deduct utilities and repairs related to the office space. Office furniture used exclusively in your home office is also deductible.

Interested in Learning More?

Schedule a free consultation with our team!

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Vyde is a licensed accounting firm (CPA) based in Provo, Utah, and members of the AICPA. We provide professional accounting services to businesses and individuals, with a focus on small business bookkeeping and taxes.

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