Most entrepreneurs don’t get into business in order to give away money, yet each year there are thousands of business owners that do. How you ask? By taking on the challenge of managing their own finances and paying their own taxes. Though many entrepreneurs think it’s seemingly the best way to save money (not hiring an accountant), it can actually result in you flushing money down the drain each year.
Uncle Sam certainly isn’t going to reach out to you and let you know, “Hey, I think this money belongs to you.” Therefore, you need to learn how to maximize your earnings so that you can get the savings you deserve. Employing financial applications or consulting with a tax professional is ultimately the best way to ensure you’re not missing out on any cash.
Commonly Overlooked Business Deductions
Still think you can pinpoint all tax credits and deductions on your own? Here are five common areas that small business owners and entrepreneurs overlook on a regular basis.
- Home Office Deductions
For entrepreneurs who are working from an area in their home, you have the opportunity to deduct for the cost of your home office. This is considered a business expense and can help reduce the amount of taxes you owe at the end of the year.
- Startup Expenses
Did you shell out a lot of cash to start your business? You may be entitled to deductions. Things such as travel, advertising, legal and accounting fees, training, etc, can be written off as expenses. You can deduct up to $5,000 per year in qualifying startup costs.
Do you utilize a vehicle for business? If you use your car, for instance, to travel to and from your clients or to transport products or services you’re entitled to write this off as a deduction.
- Losses and Bad Debts
Collection accounts, bad debt, and financial losses can wreak havoc on a small business’s finances. The good thing is that it doesn’t have to be a total loss. You may be able to qualify for a deduction. Some types of bad business debt might include things like loans provided to clients or suppliers. If you’ve tried to collect on them for a reasonable amount of time with no such luck, the IRS will give you a break.
- Employee Expenses
When you get into the realm of hiring employees, the financial responsibilities of an employer are plentiful. So wouldn’t it be nice to offset some of those expenses with an IRS deduction? Well, many small business owners are unaware that they can receive credit for employee expenses. Expenses that are directly related to work such as hotel accommodations or transportation costs, meals, gas reimbursement, etc can be written off, saving your business money.
- Health Insurance Costs
If you’re self-employed, chances are you’re paying for your own health insurance coverage. This out of pocket expense can be hefty – especially if you support a family. Health insurance is ideally a business expense which can be written off around tax time.
It’s pretty common to assume that you can do it all on your own, but the truth is, unless you’ve majored in business or tax accounting, you’re going to need assistance at some point. Many business owners try to juggle it all and miss out on the opportunity to save thousands of dollars each year. Instead of throwing money down the drain or giving it away for no reason, work with an accounting professional or financial company on a periodic basis to ensure you’re in compliance with tax laws and that there aren’t any financial opportunities that you can take advantage of. You can then use this extra money to grow your business beyond your wildest expectations.