Business Accounting - Vyde

The Business Standard Mileage Rate and How Do I Use it for My Small Business?

If you own a small business, you’ve likely heard the term “Standard Mileage Rate.” Some business owners spend a great deal of time behind the wheel, logging up to 20,000 miles in a year. Most of the time, they’re using their personal vehicle for business travel which can end up being quite expensive. The IRS has provided a Standard Mileage Rate to ensure those miles driven for business are tax deductible.

Here’s how it works:

Standard Mileage Rate Explained

Rather than adding up every mile driven, gas tank filled, oil changed, car wash and window cleaning, tire rotation, and other vehicle expenses in a year, the IRS offers the Standard Mileage Rate which provides a 57.5 cent deduction (2015) for every mile driven for business in a year. That way, business owners only have to track miles driven, and not every other cent they spend on their car. To figure a standard mileage rate, simply take the number of miles driven and multiply it by the current standard mileage rate (which changes every year).

Example: Jenny, a realtor, drove his car 15,000 miles for business during 2015. To determine her car expense deduction, she simply multiplies her business miles by the applicable standard mileage rate of 57.5 cents per mile. This gives her a total deduction for the year of $8,625 (.575 × 15,000 = $8,625).

Standard Mileage Rate vs. Actual Expense Method

Most business owners find it quicker, more efficient, and financially advantageous to use the Standard Mileage Rate. However, it doesn’t hurt to keep track of receipts and expenses and see which method gives them a better deduction for the year.

To use the actual expense method, a small business owner must keep track of every purchase made for their vehicle. These expenses include:

gas and oil
repairs and maintenance
depreciation of your original vehicle and improvements
car repair tools
license fees
parking fees for business trips
registration fees
tires
a portion of insurance premiums
car washing
a portion of lease payments

The Actual Expense Method can offer a larger deduction at the end of the year, but it require diligent and meticulous record keeping.

Which method is better?

Determining which method is better for a small business owner requires calculating both ways to see which offers the bigger deduction. Keep in mind that smaller cars usually get better gas mileage and may not require as much as maintenance as larger vehicles. In this case, the Standard Mileage Rate is almost always the better option. After you calculate both ways for the first year of using your vehicle for business, you’ll likely stick with the same method year after year. However, you are allowed to switch back and forth between the methods from year to year, but with some restrictions. Ultimately, most small business owners elect to use the Standard Mileage Rate, but both are important in tracking business expenses and deductions.

Get Ahead of the Game: Prepare for Year-End Finances Now

It’s never too early to get a headstart on your end of year finances and begin preparing for tax season. With less than one quarter left in 2015, here are a few quick and easy things you can do to see where you’re at and how your finances will look at the end of this year:

Talk to your accountant with any questions you may have. Prepare a list of questions you need to ask about your year end finances and small business taxes.

Review last year’s deductions. To ensure you maximize your small business deductions, review last year’s tax deductions to determine if you’re still eligible for those same ones this year.

Legally reduce your tax liability. If your business did well this year, you can guarantee Uncle Sam will want his generous cut. If you have a favorite charity, consider making your contribution before December 31st. You can also consider increasing your expenses by giving your employees a bonus, purchasing that new camera or computer you’ve had your eye on, or putting extra money toward your business loan. If you reduce your taxable net income and increase your tax deductions, your tax liability may be less, which is to your advantage. Consult with your accountant to make sure there are no negative implications of this and create a tax strategy for your business.

Review your year to date finances. While it won’t yet give you a whole picture of how the year will end, reviewing the last nine month’s profits and loss statements will help you get a clear picture of where you’re at and make predictions about how the year will end. This will help you begin 2016 strategically in regards to your small business finances.

Research changes to the tax code. Take 20 minutes to do some research about tax laws that may have changed in 2015 that may impact your taxes.This will help you take advantage of every credit or deduction possible. Your accountant should know and inform you of any changes that will affect your business, but it never hurts to do a little studying of your own.

Start preparing 1099s. If you used a contractor or freelancer earlier in the year and know you won’t be needing their assistance in the next two months, you can start preparing their 1099s now.

Create a payment plan or save now for your tax payment. If you think you will owe taxes for this year, you’ll want to decide whether to set up a payment plan with the IRS or save money now to meet this tax liability when the time comes.

A little planning and preparation now can save you a lot of stress and headache in April. Close out 2015 quickly by getting ahead on the financial aspect of your business and party on this holiday season!

Frequently Asked Questions:

Why should I talk to my accountant about year-end finances?

Your accountant can provide tailored advice, ensure compliance, and help maximize deductions, potentially reducing tax liability.

Why review last year’s deductions for my small business?

Reviewing previous deductions ensures you capitalize on eligible ones, optimizing tax benefits and minimizing liability.

How can I legally reduce my tax liability before year-end?

Options include charitable contributions, employee bonuses, or business expenses. Consult your accountant for personalized strategies.

Why is it important to research changes to the tax code?

Staying informed helps identify new credits or deductions, ensuring you leverage all available tax advantages for your business.

When should I start preparing 1099s for contractors or freelancers?

Begin now if you won’t need their services in the next two months. Early preparation streamlines year-end processes and compliance.

10 Steps to a More Organized Office or Workspace

As if fall schedules aren’t already full enough, the transition of a changing schedule and rapidly approaching new year can leave things around your office a little messier than you’d like. Here are a few tips on how to have an organized office before your holiday vacations this year.

1. Purge your office. Take a look around and get rid of everything you don’t need or use. What haven’t you used in a while? If that dusty old printer (or fax machine or scanner or laptop…) is still sitting in the corner broken, either toss it or send it out for repairs. This goes for furniture, equipment, office supplies, and anything else in your office that’s been sitting for a while. If it isn’t useful
2. Create a place for everything. Gather up everything that has a place and put it there. For those items that remain homeless, grab some totes or storage bins and make them a home. Don’t forget to label! The same goes for paper–grab some paper trays that sit on your desk or hang on the wall or even a few binders and label them according to their use.
3. Rethink efficiency and proximity. Do you find yourself walking all the way across the office for paper for the printer that sits at your desk? Keep the items you use most close to your desk and store the supplies you rarely use.
4. Set up a charging station. You undoubtedly use some form of technology for your small business like for the small business bookkeeping. Rather than lugging your phone, ipad, and camera chargers to and from your office, grab an extra of each and set up a charging station in your office. Use surge protectors to guard against electrical damage and keep your cords untangled to make them last longer.
5. Revise your filing system. Store your files digitally to maximize efficiency, but make sure to always have a backup either in the cloud or on an external device. Keep a few usb drives in your desk drawer and label them according to their contents. If digital storage isn’t for you, sort through your filing cabinets and toss the papers you don’t need anymore to make room for a more organized filing system.
6. Assign discard dates. You don’t need to keep every piece of paper indefinitely. Mark on files or documents when they can be tossed or shredded. Some legal or financial documents must be kept for specified length of time. Make sure you know what those requirements are.
7. Straighten your desktop and drawers. Keep only the essential things on top of your desk–this will reduce clutter and give you more room to work. Having two paper trays–one for completed tasks/projects and one for your “to do” projects, will help you keep your desktop free of clutter.
8. Use vertical space. This often overlooked tip can save you tons of space, especially in a small office. Hang a few shelves for photos, knick knacks, and souvenirs that would normally sit on your desk. You can also utilize vertical space by hanging white boards, filing systems, and calendars.
9. Invest in a good label maker. Label your files, supplies, and storage bins. That way, whenever someone needs something, you will know exactly where it is.
10. Make time for weekly organization. If you’ve got an efficient system of organizing your office, make time for weekly maintenance to clear the piles and straighten your desktop. Make a checklist to keep in your drawer including tasks like sort mail, throw away sticky notes, log receipts, etc.

Follow these steps to organize your office and you’ll be off to a great start in 2016! For more tips on maintaining a tax deductible home office, visit this series.

FAQs on Office Organization:

1. How do I decide what to purge from my office? Assess items you haven’t used recently. If broken equipment or unused supplies linger, consider repairing or discarding them to declutter your space effectively.

2. What’s the importance of creating a designated place for everything? Assigning specific spots for items reduces clutter. Use labeled storage bins, trays, or folders to organize belongings, facilitating easy retrieval.

3. How can I improve efficiency in my workspace? Optimize proximity by placing frequently used items near your workspace and storing infrequently used items farther away to streamline workflow.

4. Why set up a charging station in the office? Establishing a charging hub with spare chargers prevents the hassle of carrying devices back and forth. Surge protectors ensure safety and prolong cord life.

5. What’s the best approach to revising a filing system? Digitize files for efficiency, backing up data in the cloud or on external devices. For physical files, sort and discard unnecessary papers while adhering to legal retention guidelines for vital documents.

8 Quotes to Encourage You to Achieve Your Small Business Goals

There is plenty of time to accomplish that one thing that you promised yourself you’d do this year. Take time today and make a plan. Follow up on sales calls, take your spouse on more dates, clean out your office, eat healthy, be grateful, increase profits, send an email blast to clients – whatever it is for you, make a decision TODAY and a goal for the end of Q4. Then get busy making it happen. EVERY DAY. That’s what we’re doing over here.

We’ve compiled a list of 8 great quotes to remind you of how important your goals are and encourage you to conquer them one by one. Download the printable version, here.

Small Businesses Required to Adopt EMV Chip Card Technology

As small business owners we have to be extra vigilant to protect ourselves. If you’re accepting credit card payments, please make sure to update your systems immediately.

The responsibility of EMV chip card technology updating is now on the shoulders of small business owners, and they could be the ones facing the consequences if their systems are not up to date.

Stanley Nakano, the Small Business Administration’s Acting Regional Administrator said:

“A major transition is happening in America and small business owners who fail to act may pay a huge price. U.S. credit card companies have set October for the national adoption of chip cards (also known as EMV Cards). Businesses that have not integrated EMV technology to process chip cards will become financially responsible for fraudulent transactions previously covered by the cardholder’s issuing bank.”

Read the full article here.

If you haven’t taken action to update your systems for the new chip card technology, check out these popular posts:

How does the EMV liability shift affect my business?

What do I need to do to prepare my business for the EMV liability shift?

What is chip card technology and the EMV liability shift?

Understanding This One Number Can Make Your Small Business More Profitable

Ever wonder what financial stuff you need to know to make more money? Ben & Greg break it down in this video to help you make more money at your small business, blog or freelance job.

0:40 Sample P&L (Profit & Loss Statement): What is Cost of Goods Sold? Why is it important to me? These expenses vary with your sales – the bigger your sales, the bigger these costs.

2:23 Visual of Cost of Goods: How much money am I really making in profit? For every dollar I make how much do I spend? How does the Cost of Goods ratio show me what I should focus on improving in my business? Decreasing Cost of Goods Sold will increase my profit. Wahoo!

4:15 The Ultimate Goal in a Graph: Net Profit increasing & Cost of Goods sold decreasing

How does the Credit Card Shift Technology Affect You?

If you haven’t already heard, merchants will be required to make the change to the new EMV (Europay, Mastercard, and Visa) credit card chip technology beginning October 15th. If you own a small business and accept physical credit cards, you are required to be in compliance with the updated systems. If you accept cards online only, you don’t yet have to make any changes.

Check out the posts below on how this change affects you and what you need to do to prepare for the credit card shift technology.

What is credit card chip technology and the EMV liability shift?

How does the EMV liability shift affect my business?

What do I need to do to prepare for my business for the EMV liability shift date?

Vyde’s Year-End Business Accounting Checklist

As December approaches, it’s time to start thinking about your small business bookkeeping and closing out the year for your small business. While that may sound like an overwhelming feat to accomplish in addition to a busy holiday season, we’ve made the accounting part easy with our quick, printable year-end business accounting checklist. Click here to download.

Kickstart Your Small Business in 2016: 11 Things To Do Annually For A More Successful Business

As 2015 comes to a close, you have an opportunity to reflect on the past year with your small business. What worked? What disasters did you encounter/overcome? What was the one thing you knew you should do for your small business but could never find the time? Now is the time to make a plan for an even better business year in 2016 and crush the goals you set for yourself.

In order to conquer the small business world next year, there are a few logistics to take care of first. We’ve put together a quick and easy checklist of things to do and take care of in January so you have 11 full months of small business bliss. Download the printable version, here.

How to Set Up & Maintain a Tax Deductible Home Office for your Small Business

If you own a small business, you undoubtedly work from home, at least on occasion. If you’re like many small business owners in today’s world, you might even work exclusively from home. Whichever category you fall under, claiming a “home office” on your taxes and adding it into your small business bookkeeping can be tricky.

Here’s how to set up and maintain a home office that is in line with IRS standards.

What qualifies as a home office?

What home office expenses are tax deductible?

How do I claim a home office on my taxes?

What if I do business outside of my home office?

Can I claim a bathroom as part of my home office?

Do you have other questions about your home office? We can help! Send us your questions or leave them on our Facebook page and we’ll be sure to answer them as quickly as possible.

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Category: Business Accounting