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:

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

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!

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!

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!

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:

Make a promotion out of it. Attach your business card or a promotional flyer to packets of M&M’s and voila! Deductible.
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.
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.
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.”
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

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?”

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!

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?

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!

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!

What If I Don’t Have Receipts? A Guide on How to Record Expenses Without Receipts

What If I Don’t Have Receipts for Last Year’s Business Expenses?

It’s tax time and you don’t have receipts for last year’s business expenses. Now what? You can still claim deductions on your taxes without receipts for every transaction. Keep in mind that you don’t have to send your shoebox full of receipts to the IRS. You’ll only need them if you’re audited (which can happen up to 6 years after filing your taxes). However, it’s best to find documentation of every deduction you plan to take now rather than risking not having records if you’re audited a few years down the road.

If you don’t have original receipts, other acceptable records may include canceled checks, credit or debit card statements, written records you create, calendar notations, and photographs.

The first step to take is to go back through your bank statements and find the purchase of the item you’re trying to deduct. Print it out or save a file and make a note of when and where the item was bought, as well as how much you paid for it.

When it comes to travel expenses and business trips, if you don’t have receipts, you’ll need to do the same thing. Review your credit card statements, mileage logs, and calendar notations for records. For more information about what you can deduct when it comes to business travel, check out our detailed business trip deduction guide.

For other business-related purchases without records, it is wise to take a picture of the item purchased then write down where you bought it and how much it cost. If you know the name of the store, look up the item on the store’s website and write down the cost or take a screenshot of the listing.

Another way to account for lost receipts is to show a pattern of spending. If you started keeping records for your office’s monthly staff lunches halfway through the year, you could use your average expenses for those months to estimate the expenses for the months you didn’t track.

If you are trying to gauge how long to keep these records, here is a helpful guide:

Download a printable version here.

Unfortunately, there is no perfect way to make up for original lost receipts. However, with today’s technology, you leave a record of spending everywhere you go. If you find yourself in the situation of not having last year’s receipts, vow to create a more organized tracking system from here on out so that you don’t run into this problem in the future. Here are a few ideas on tracking receipts for your small business this year.

If you are looking to eliminate the headache of your business taxes, reach out to our team. We help over 10,000 businesses across the US manage their bookkeeping and taxes. We would love to help!

FAQs: Handling Business Expenses Without Receipts

1. Can I still claim deductions without receipts?

Yes, you can claim deductions even without receipts. Alternative records like canceled checks, bank statements, written records, calendar notations, and photographs are acceptable.

2. How do I document purchases without original receipts?

Review bank statements or credit card records to identify purchases. Note down details like dates, amounts, and vendors. For travel expenses, utilize credit card statements, mileage logs, and calendar notations.

3. What if I can’t find records for business-related purchases?

If records are unavailable, take a photo of the item purchased and note the details. If known, retrieve information from the store’s website or use spending patterns to estimate costs.

4. How long should I keep records for tax purposes?

Refer to a helpful guide such as KeepItFor-01 for record retention guidelines. It’s crucial to maintain records for the recommended duration to ensure compliance.

5. How can I improve record-keeping for future tax seasons?

Invest in digital tracking systems and vow to maintain organized records to avoid similar issues in the future. Consider ideas for tracking receipts to streamline your small business’s financial management.

Interested in Learning More?

Schedule a free consultation with our team!

5 Commonly Missed Business Tax Deductions

Whether you know it or not, you could be leaving hundreds—even thousands—of dollars on the table by missing a few lesser-known small business tax deductions.
Entrepreneurs often miss some small business deductions they could qualify for because they didn’t keep accurate records throughout the year, or they shy away from the complications of itemizing each expense. Avoid overpaying taxes this year by making sure you’ve reviewed all small business deductions to see if you qualify.

5 of the Most Missed Tax Deductions for Small Businesses

Business-Related Meals and Entertainment. Just keeping receipts on a business trip isn’t quite enough. Business owners who have an especially wide network and social schedule often spend thousands of dollars on eating out and entertainment for/with clients throughout the year. Many don’t keep accurate records and aren’t sure if they can really classify the meetings as “business-related.” However, keep in mind, there is no hard and fast rule about how much of the meeting must be taken up by business talk. You can safely deduct 50% of your meals as long as you can show a new client lead or referral came from the meeting. If you haven’t been saving your receipts this year and think you may have missed deductions in this area, a bank statement will suffice.
Calculating Vehicle Expenses. Sure, $0.57 per mile driven can really add up when you take a road trip across the country to further your business. Most business owners find the Standard Mileage Rate to be more than fair, but it’s worth calculating vehicle expenses the hard way if you are really looking to save on your tax bill. Believe it or not, the “hard way” really isn’t all that hard. First, divide business-related by your total miles driven for the year. This will give you a percentage. Take that percentage and apply it to gasoline costs, car washes, new tires, oil changes—even a satellite radio fee or new seat covers. You can calculate “anything that is for the betterment of the vehicle.” Keep in mind that miles driven to and from the office each day do not count as “business.”
Home Office—The Hard Way. The IRS allows a simple home office deduction of $5 per square foot. Again, more than fair for some business owners, but others take the long route and find that it works to their advantage. Calculating your home office using the traditional method involves measuring the office square footage, and dividing it by the total square footage of the home. You can then apply that percentage to home-related expenses such as electricity, heating, mortgage payments, and home depreciation. Calculate your home office deduction both ways and find which works better for you.
Startup Costs. An often forgotten deduction comes in the form of expenses incurred before your business actually opened its doors. The great thing about startup costs is that there is really no limitation on how far back these expenses can be counted. If you took a continuing education class, bought a computer that is now used for work, took a future client out to dinner, you can count those as deductions. The IRS allows a deduction of up to $5,000 for the first year, and the rest amortized over the next 15 years.
Employee Expenses. If you reimburse clients for any business-related expenses, don’t forget to keep track. Other employee expenses include gas, meals, hotel accommodations, tips, baggage fees, etc. You can also deduct the cost of gifts given to clients, as well as wrapping and shipping costs associated with those gifts.

This is obviously not an exhaustive list of commonly missed tax deductions—pet moving expenses, the cost of quitting smoking, clarinet lessons (yes, all real!)—but these are certainly the most common for entrepreneurs and small business owners. If you need help knowing what is and isn’t tax-deductible and making sure you are within IRS regulations, our accountants can help. Reach out to us today!

Frequently Asked Questions:

1. How can I ensure I don’t miss out on small business tax deductions?

Maintain accurate records throughout the year. Review all possible deductions to maximize savings and avoid overpaying taxes.

2. What are the deductions related to business meals and entertainment?

Deduct 50% of business-related meal expenses if they contributed to new client leads or referrals. Bank statements can suffice if receipts are unavailable.

3. How do I calculate vehicle expenses for tax deductions?

Use the Standard Mileage Rate or calculate expenses based on the business-related percentage of total miles driven, including various vehicle costs.

4. What’s the process for claiming a home office deduction?

You can opt for the simplified $5 per square foot deduction or calculate expenses using the traditional method based on office square footage.

5. What are deductible startup costs, and how far back can they be claimed?

Startup costs incurred before business commencement can be deducted, with no specific time limit, up to $5,000 in the first year and the rest over 15 years.

How to Make Sense of Your Small Business Financial Reports

Even though we’re accountants, we get that financial reports aren’t at the top of every small business owner’s to do list. Most small businesses run on slim budgets and personnel staff of one or just a few. But whether you keep your own books or employ the services of a bookkeeper or accountant, understanding the numbers can help your small business just as much as it could help a large corporation. So lets cover some basics so that you’re ready to make sense of it all and succeed with your business.

Know the Key Terminology

It goes without saying that understanding the terminology will help a ton in understanding your financial reports. We cover quite a bit of it here on the blog but you can also easily find it just by searching the term on the internet. Our best advice, read through this post and the one we link to down below. Search definitions for any words you don’t know, and jot down definitions in a notebook or sticky and put it with your financial paperwork. If you’ve got a bookkeeper or an accountant on hand – ask them. You’re more than likely paying for their services, so schedule a time that you can pick their brain, or ask for an entry-level crash course to the financial reports that they’re creating for you. No matter how you go about it, you can always come back here and look for those key accounting terms explained – we have a word of the week posted here on the site and you can learn about the first one, income statement, right here.

Be Consistent in Reviewing Your Financials

There is absolutely no reason to make sense of your financial reports if you’re not going to read them – on a regular basis. So right now, before you even dive into your first report, pull out your phone or your work calendar and set a monthly meeting for you and your books. Consistently reviewing the financial reports will help you create long term strategies to grow your business or expand your product line or services. We promise the time you commit to reviewing your financial reports monthly will be well worth it.

Looking to learn more about what your financial reports really tell you? You can read all about it here.

FAQs about Small Business Financial Reports

Why are financial reports important for small businesses?

Financial reports provide insights into the financial health and performance of your business, guiding strategic decision-making and growth.

How can I understand the key terminology used in financial reports?

Search online resources for definitions, ask your bookkeeper or accountant for guidance, and explore educational posts and resources provided by accounting professionals.

Why is consistency crucial when reviewing financial reports?

Consistent review of financial reports enables you to track progress, identify trends, and make informed decisions to drive business growth and expansion effectively.

What benefits can regular review of financial reports offer to small businesses?

Regular review helps in identifying areas for improvement, adjusting strategies, and setting long-term goals to enhance business performance and profitability.

Where can I learn more about interpreting financial reports for my small business?

Explore comprehensive resources and educational materials provided by accounting professionals to gain a deeper understanding of financial reports and their implications.

What Are Expenses?

We work with small business owners and entrepreneurs. Some are seasoned, others are just growing their side hustle. Their skills are varied and they have a wide variety of talents. We often get asked to explain the ins and outs of financial reports and have found that providing our favorite clients with a working knowledge of accounting terms is helpful. With that end in mind, we’re sharing that expert knowledge with you. So if you’re looking to get a better grasp on your small business books, want to understand your financial reports so you can make better business decisions, or even are just starting out and want to do it right… you can check out our word of the week and start expanding your working financial knowledge.

What Are Expenses?

Business expenses include any money you use to buy something for your company. There are 2 types of business expenses that you may want to track for your financial reports:

overhead costs – are items you pay that probably don’t fluctuate all that much, rent, utilities, insurance, etc.
operating costs – these costs can fluctuate more easily, and are directly related to running your business including, raw materials, supplies, inventory, etc.

When it comes to business expenses, the best thing you can do is track them all. If you’re spending money from your business bank account, then you need to have a receipt, invoice or make a note in your business ledger for that transaction. You can always go back later and decide which type of expense it is, but knowing where the money is going is key to understanding your financial standing.

How Does Knowing Your Expenses Help?

So once you know what an expense is, and you maybe have even categorized them, it’s time to talk about why knowing your expenses can help your bottom line. You’ve probably heard that saying “knowing is half the battle…”, well it applies here. If you know where your money is going you’ve got a good bird’s eye view of the inner workings of your business. If you’re finding that you’re not making as much profit each month, you’ll want to look at your expenses? Have the cost of raw materials gone up? If you’re looking to strategize and have a surplus of funds for things like rent, etc. you’ll be able to look back at your total expense, and then break that cost up into monthly payments so you’ve got a strategy that doesn’t drain you of cash all at once.

Resources

Category: Business Accounting

Top 20 Common Advertising Expenses Examples for Small Business Owners

20 Common Tax-Deductible Advertising Expenses for Small Businesses

Tax-Deductible Goodwill Advertising Expenses

FAQs about Tax-Deductible Advertising Expenses for Small Businesses:

Interested in Learning More?

Financial Reports Start with a Bank Statement

What Does My Profit & Loss Statement Tell Me?

What Can I Learn From a Balance Sheet?

Why Do I Need to Understand My Financial Reports?

Who Needs to Pay Estimated Quarterly Taxes

Calculating Estimated Taxes

Estimated Quarterly Tax Deadlines

How to Submit Your Taxes

Estimated Quarterly Tax Penalties

How Vyde Can Help

Do I Need a Professional Bookkeeper?

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

1. Your Books Are Never up to Date

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

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

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

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

Do I REALLY Need to Hire a Bookkeeper?

Is Office Furniture Tax Deductible?

What Office Furniture is Tax Deductible?

Home Office Expenses

Frequently Asked Questions

Interested in Learning More?

What If I Don’t Have Receipts for Last Year’s Business Expenses?

FAQs: Handling Business Expenses Without Receipts

Interested in Learning More?

5 of the Most Missed Tax Deductions for Small Businesses

Frequently Asked Questions:

Know the Key Terminology

Be Consistent in Reviewing Your Financials

FAQs about Small Business Financial Reports

What Are Expenses?

How Does Knowing Your Expenses Help?