Unfortunately, many small business owners have common misconceptions when it comes to filing taxes. According to small business expert Donna Fenn, one of the biggest mistakes small business owners make is not considering how many items can be deducted each year.
However, in order for a tax deduction to be legitimate, it must be properly documented and recorded when submitted to the IRS.
The following are important write-offs that you can’t overlook as a business owner or independent contractor when filing your taxes this year:
· Home office space. If you work as an independent contractor or operate a small business out of your home, you may qualify for a tax deduction based on the amount of home office space that you use for your business.
When working from home, you have the potential to deduct at least a portion of your rent or mortgage, which may include other items like your electricity, water, cable, Internet, and even business phone system bill.
As a rule of thumb when working from home, it is best not to write off more than 50% of any of the items listed above to stay on the “good side” of the IRS.
· Office supplies. From items as small as pens, paper, and staples to more expensive business equipment like printers, fax machines, and copiers, you can deduct almost any legitimate office supply you can think of.
This may also include instructional or educational DVDs and books, as well as a water cooler or coffee maker purchased for your home office. If you are confused about any supply deductions that may or may not apply, it may be best to consult with a tax professional before deducting.
· Networking expenses. If you have treated clients to dinner, or even if you have paid a membership fee to become a part of a local professional organization, all of those expenses can be deducted if they relate to your business.
The key is to keep all of your receipts and invoices to track your deductions meticulously in the unfortunate event that you are audited by the IRS.
· Transportation. Last but not least, don’t forget about transportation related to your business or meetings with clients. This also includes any trips for business purposes, such as traveling to a seminar or tradeshow related to your industry.
Whether you have a small business or are self-employed as an entrepreneur, the same rules still apply. If you file taxes as a small business through the IRS, tax write-offs are vital to cut down on the percentage of taxes that you will pay to the government each year.
About the author: Sylvia Rosen is an online writer who connects with business professionals to write articles on a variety of industry topics, trends and tools, such as small business phone systems.