Mazuma is now Vyde

Resources

Category: Business 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!

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!

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

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!

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!

pattern of spending

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!

How many years can I claim a loss on my business?

If you're wondering, "How many years can I claim a loss on my business?" then you're probably reaching a point where you've been claiming too many losses on your taxes. The Internal Revenue Service (IRS) only allows your business to be in the negative for a certain number of years before it declassifies it as a business. We'll teach you the rules regarding business losses and help you determine if you can still claim your business on your taxes.

How many years can I claim a loss on my business?

The IRS will only allow you to claim losses on your business for three out of five tax years. If you don’t show that your business is starting to make a profit, then the IRS can prohibit you from claiming your business losses on your taxes.

After you claim a loss for three of the five years, the IRS will classify your business as a hobby. Hobbies are not tax deductible so you won’t be able to claim any of your expenses on your taxes. This declassification is called the Hobby Loss Rule.

How can I prove my business is more than a hobby?

If you want to continue claiming your business on your taxes, you need to show the IRS that it’s more than just a hobby.

First, you’ll have to show that you are running your business as a business, not as a hobby. You should meet these three criteria:

  1. Have a business plan.
  2. Show that you have plans, or at least intentions, to turn a profit.
  3. Present business records that show you understand how to report business income accurately.

The IRS will also consider the following factors to determine if your business should qualify as a business or hobby:

  • Have you made a profit in the past?
  • Do you live off of the income made from the business?
  • Were your losses beyond your control?
  • How much time do you put into the business? Are you spending enough time to make it profitable?
  • Did you change your business methods in an effort in increase profits?
  • Do you have the knowledge to run a profitable business?

Your business should be able to positively answer at least a few of these questions. It takes more than just one to be considered a business.

What do I need to know about still claiming my business after it’s been classified as a hobby?

First, you need to understand that if you try to claim a loss on your hobby (even if you consider it a business), it could trigger an audit by the IRS. You need to determine if you want to still claim losses on your business after it’s been classified as a hobby. Typically, you can determine this by going through the questions we outlined earlier.

The best way to show the IRS that you’re a serious business owner is to keep records. Most people don’t keep records regarding their hobbies, so this simple tip can help prove that your intention is to run a profitable business.

claiming my business after it's been classified as a hobby

Just because you feel like your business is more than a hobby doesn’t mean the IRS will agree. It’s best to talk with a professional accountant to assess the auditing risk associated with claiming your business on your taxes again.

Casino players across Australia are always on the lookout for the best gaming experience, which not only includes a wide variety of games and stellar customer service but also fast payouts. Encountering delays when withdrawing winnings can dampen the excitement of online betting. Recognizing this, casinoau10 has taken the initiative to compile a comprehensive list of Australian casinos that stand out for their quick payout processes. This curated selection ensures that players can enjoy their winnings with minimal waiting time, enhancing the overall gaming experience.
Whether you’re a fan of slots, table games, or live dealer options, finding a reliable casino with fast payouts is crucial. To discover the top-notch casinos that guarantee swift transactions, visit https://casinoau10.com/fastest-paying/. Here, you’ll find a guide tailored to cater to the needs of Aussie players seeking efficiency and reliability in their gaming ventures.

Ready for a dinkum Aussie experience? Give Fair Go casino a spin! This online casino brings the best of the Outback directly to your screen. Enjoy a massive collection of pokies from top providers, generous welcome bonuses for new players, and ongoing promotions galore. Fair Go takes a no-nonsense approach with fast deposits and withdrawals, Aussie-friendly payment options, and 24/7 customer support available for any questions or a quick yarn. Fair dinkum, mate, this casino embodies the true blue Aussie spirit!

Get a taste of the high life at Uptown Pokies casino. Offering a sleek, sophisticated ambiance, Uptown Pokies is all about thrilling pokies action, massive jackpots, and a touch of class. Discover a vast gaming library with top-notch titles and exciting new releases. New players are greeted with an eye-popping welcome package, and regular promotions keep the good times rolling. Enjoy secure transactions, excellent customer support, and immerse yourself in a world of opulent entertainment at Uptown Pokies.

Step into the realm of exclusivity with Inclave casinos Australia. These carefully curated casinos cater to discerning players seeking personalized experiences and exceptional service. Enjoy a handpicked selection of high-quality games, exclusive VIP benefits, and the assurance of responsible gambling practices. While details about specific Inclave casinos may be limited, the allure lies in the promise of tailored rewards and bespoke luxury only available to members of this select circle.

If you need additional tax or accounting help, reach out to our team at Vyde. We work with small business owners to save them time, stress, and money on their taxes and stay on top of their finance.

FAQs about Claiming Business Losses on Taxes:

How many years can I claim a loss on my business?

The IRS allows you to claim business losses for three out of five tax years. Afterward, it may classify your business as a hobby, making it ineligible for tax deductions.

How can I prove my business is more than a hobby?

Demonstrate you’re running a legitimate business by having a business plan, showing profit intentions, and maintaining accurate business records. Factors like past profits, time investment, and business knowledge also influence the IRS’s assessment.

What happens if my business is classified as a hobby?

Once labeled a hobby, claiming business losses triggers an IRS audit risk. To avoid complications, consider the questions outlined earlier to assess if your business qualifies, and keep meticulous records to demonstrate your seriousness.

Can I still claim losses after my business is classified as a hobby?

Attempting to claim losses on a hobby may lead to an IRS audit. Evaluate the risks and, if determined, consult a professional accountant for guidance on proving your business’s legitimacy.

How can Vyde assist with tax and accounting concerns?

Vyde supports small business owners with expert tax and accounting services, saving time, reducing stress, and optimizing financial management. Reach out for personalized assistance and stay on top of your finances.

Interested in Learning More?

Schedule a free consultation with our team!

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

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.
Most Missed Tax Deductions for Small Businesses

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.

5 Commonly Missed Business Tax Deductions

When you’re starting out as a business owner, you’ve got to be scrappy. There’s no shame in trying to save a few dollars by managing multiple aspects of your business yourself. However, as your business grows, you’ll find that an endless list of “to-dos” makes it hard to do it all. You may find yourself dropping balls that shouldn’t be dropped.

The accounting side of your business is easy to fumble—especially if your mind is on a million other things. If you don’t have the time to devote or you don’t know what to look for, you could be making mistakes that drastically impact your business.

Risks of Being Your Own Accountant

Incorrect Data Entry:

When you’re busy, rushed, or distracted, it’s easy to enter incorrect data into your books. 

Missed Deductions:

Because you’re a business owner and probably not an accountant, you may not know all the things you can deduct. Missing deductions costs your business money.

Missing Revenue:

Incorrect books can cause you to have revenue that is unaccounted for and you may never know.

Unpaid Invoices:

When your books are not in order, you may not notice an unpaid invoice—by you or someone who owes you.

Underestimate Tax Bill:

When it comes to paying taxes, no one likes to be surprised by a larger number than what they were expecting. Incorrect books can cause a miscalculation and underestimation of your tax bill.

Reporting is Unreliable:

How can you make business decisions with incorrect data? When your books are wrong, your reports will be too.

There are potential risks of DIY-ing your accounting, so how can you determine when the risk of being your own accountant becomes too much? When do you know it’s time to hire an accountant?

When you have no time.

When your schedule becomes too full to handle, you may find the need to delegate tasks to others to lighten your load. By investing in accounting services, you’ll be able to hand off the detailed job of bookkeeping to someone who can focus on it and get it done quickly and correctly. This way, you can spend your time worrying about other important things—like growing your business.

Risks of Being Your Own Accountant

When you don’t know what to do.

You may have tried being your own accountant, but question after question kept coming up.  When you feel as though you don’t have as much knowledge on bookkeeping or business taxes to confidently manage your business’ books, you have two options: learn it or delegate it. By hiring an accountant, you’ll be able to benefit from their in depth knowledge and know that your books are being taken care of. 

When your books are messy.

If your books are unorganized, you could be making costly mistakes for your business. Things like missing revenue, unpaid invoices, and tax deductions all directly impact your business’ revenue. Having well kept books also ensures that you can pull correct reports—which help you to make data driven decisions about your business.

The decision to hire an accountant depends on where you are in your business, but remember—accountants exist to help you keep track of (and save) your business’ money. If you feel like you’re in over your head, it may be time to hire someone to tackle your bookkeeping for you.

FAQs:

1. What risks come with being your own accountant?

Common risks include incorrect data entry, missed deductions, overlooked revenue, unpaid invoices, and underestimating tax bills.

2. How does having incorrect books impact a business?

Incorrect books can lead to unreliable reporting, hindering your ability to make informed business decisions based on accurate data.

3. When is it time to hire an accountant?

Consider hiring an accountant when you lack time to manage your books, feel uncertain about bookkeeping tasks, or find your business’s financial records are messy and disorganized.

4. Why should I delegate bookkeeping tasks to an accountant?

Delegating to an accountant ensures that detailed bookkeeping is handled quickly and correctly, freeing up your time to focus on essential aspects of growing your business.

5. How can an accountant help if I don’t have much knowledge about bookkeeping or taxes?

An accountant brings in-depth knowledge to manage your books effectively, providing expertise in navigating complex aspects of business taxes and bookkeeping.

During tax time, it goes without saying that pulling together the receipts and invoices, filling out the paperwork, and making sure you’ve got all your deductions lined up and in a row takes more time than you think. As we near the tax deadline, you might be thinking that it’s time to consider filing for a tax extension. And that doesn’t necessarily have to be a bad thing. Here are a few reasons why filing for a tax extension could be a huge benefit to you and your business:

  • you gain 6 months to file
  • relieve the stress of pulling it all together by the tax deadline
  • more time and less stress means you’ll make less mistakes and not forget any important pieces to the financial puzzle
  • you’ll be able to find missing info or verify things that may seem inaccurate

If you owe taxes and you aren’t able to pay them, we highly suggest that you don’t file for a tax extension. Tax extensions only give you extra time to file, not extra time to pay so you’ll want to make sure that you make any payment in the amounts that you think you may owe when you file for your extension. If you’ve got questions regarding your specific tax situation, we’d be more than happy to answer them. 

What To Do After You File For Your Tax Extension

Once you’ve decided that you can benefit from a tax extension (and it’s for the right reasons), it’s time to make sure you’ve got your bases covered. You’ll complete the tax extension paperwork and submit it to the IRS, but you’ll need to make sure you take care of a few important aspects once you’ve finished submitting your tax extension.

Read more on how to make sure your tax extension request is a success…

Getting Started with Income Taxes

It’s a new year and you’ve got a list of business goals that you’re ready to tackle. Not so fast though – you’ve got to prep & file income taxes! Maybe you’re ahead of the game and spent the last quarter of 2018 pulling it all together, or maybe you’re a tax expert and you’ve been following a plan and keeping things in order over the course of the whole year.

But honestly, most people fall into the third camp – the “oh yeah, I’ve got to get the tax stuff ready” group. So make things easy when it comes to the prep & file income taxes task. Here are our top tips and you can follow the link to grab a checklist (prepared by an actual accountant) so you can fast track your to dos.

Tips for Filing & Prepping Your Income Taxes

  • pull out a large envelope or file folder and put all the important stuff there – fast track for 2019 and put together a folder right now so you can stash stuff over the course of the year and be ahead of the game
  • make a list and break it down into manageable chunks – there’s no reason to spend a whole day on it when you have other things to do. You can easily spend 5-10 minutes today and still get your taxes filed way before the deadline
  • when it comes to filing – consider what it’s really going to take. Maybe you’ve got a bunch of questions, no budget to purchase the latest DIY tax filing software, and even less time to get it all done. Know how much time you have to commit to it, and then make a decision about how you’ll file – DIY, hire an accountant, visit a tax filing kiosk set up at a local business etc.
  • Pull all the personal information that you’ll need to verify or provide in advance. Remember you’ll need full names, social security numbers, dependents, etc.
  • keep an eye out for tax forms from your employer, bank accounts, charitable donations, student loans, mortgages, etc. You should receive them in the mail or electronically in the next several weeks
  • take a few minutes to sit down and brainstorm any possible deductions for the year. If possible, find receipts or check bank statements so that you have accurate numbers and proof to provide to the IRS in case your audited
  • make things a little bit more fun – turn on some music, work alongside a friend or family member, have your favorite snack or beverage so that prepping & filing for taxes isn’t such a chore

Tips for Filing & Prepping Your Income Taxes

You can download your tax checklist here

Conclusion

Getting started with income taxes can seem daunting, but with the right approach and preparation, the process becomes much easier to handle. By understanding key concepts like deductions, credits, and tax filing requirements, you can ensure that you’re on the right path to managing your taxes efficiently. Whether you’re filing for the first time or are simply looking to improve your tax strategy, taking the time to plan and organize your financial documents will make a significant difference.

If you find yourself feeling overwhelmed or need professional guidance as you get started with income taxes, don’t hesitate to reach out for expert help. Vyde, the most trusted accounting firm in the U.S., is here to assist you every step of the way. Contact us today to ensure your taxes are filed accurately and with confidence!