Tag Archives: Tax deduction

5 Quick Year End Tax Tips

So 2013 is ending in about 3 days and here you are wondering what you can do to cut your tax bill.  Well, while most of your options are just about gone, here are 5 quick things to consider:

Do A Test Run of Your Tax Return
If possible, why not do a quick test run of your return?  The year is almost done so you should have most of the information you need to come up with a projection.  Sure, some of the numbers will need to be estimated, but the end result should yield a pretty good picture.  With that picture in hand, you will know what moves you can or need to make before year’s end.

Pull Expenses Into 2013
Both individual and business returns tend to be prepared on a cash basis.  Thus, if you can spend the money in 2013, you will get it to count on your return.  Have some medical purchases (e.g. glasses, contacts, etc) that you were planning to make in January?  Move them into December and they’ll be deductible on this years tax return.  The same is true for that mortgage payment of yours.  If the bank cashes the check in December, the mortgage interest will increase your deduction for this year.

Shift Income into 2014
Are you a self employed business person?  Do you operate on a cash basis?  Well, if you want to reduce your taxable income for 2013, why not consider billing your customers late or giving them a little grace period to pay so that the revenue hits your desk in 2014.

Make Those Last Minute Retirement Contributions
Do you have a company 401(K) account but haven’t contributed the Federal maximum of $17,500?  Well, each dollar you contribute reduces your taxable income.  Already received your last paycheck?  Not to worry, you can still make a contribution to your IRA AND if you meet certain income limitations, you can shave a little off your tax bill.  If you are self employed, you can make contributions to SEP and SIMPLE plans to receive a tax benefit on your return.

Give To Charity
Were you considering making a donation next year to a certain charitable organization?  If so, consider making them in 2013 and you can reduce your taxable income.  Have some items in your house that are taking up space?  Why not give them to the Salvation Army, Goodwill or your other local charitable organization?  You’ll be able to deduct the fair market value of the goods on your tax return and help out someone in need.  Just make sure you follow these tips to get the most out of your donation.

Ensuring You Don’t Miss Business Expense Deductions

When you run a small business, saving money on your tax return sometimes comes down to little more than keeping good records.   Unfortunately that means tracking all those little expenses, because they can add up throughout the year.  The question is, are you capturing all those small expenses?  If not, here are some tips on how to ensure you’re not leaving money on the table.

Frequently Forgotten Expenses

It’s staggering how much goes into running a small business, and how quickly things can become tangled between business and personal accounts – especially for sole proprietors.  Think about it.  You’re doing your grocery shopping and remember you need a new desk calendar, so you toss one in your cart.  Or you’re Christmas shopping on Amazon and see a good deal on printer ink, so you stock up.  Or maybe you’re meeting a potential client for breakfast and while you remembered to deduct your meal, you forgot about the mileage to get there.

These types of common, but small, expenses can quickly add up to a major tax deduction.  The trick is remembering to deduct them.  Some of the most common (and often overlooked) business expenses include:

  • PayPal and other payment processing fees.  If you get paid via PayPal, then you know they charge around 3% of each transaction for the service.  These fees quickly add up so make sure you’re keeping track and adding them to your tax return as “bank fees.”
  • Dues and subscriptions.  Do you belong to paid forums or membership sites related to your business? These charges are deductible as well.
  • Small Office supplies.  This includes the stuff like paper, pencils, staples, etc.  It’s not uncommon to forget that you bought these things or to purchase them during a trip where you’re also buying personal items.
  • Domain names and hosting.  Your Hostgator bill, GoDaddy purchases, etc.
  • Advertising.  Whether you do pay-per-click via Google or Facebook, buy mailing lists, or pay for ad placement on other websites, it’s all deductible.
  • Commissions.  Do you have sales staff? Deduct those payments!
  • Business Mileage.  Remember that trip to get the office supplies above?  You did deduct the mileage right?  Is tracking your miles too hard?  Consider getting an app for your phone like Tap2Track Mileage which uses GPS to do all the calculating.
  • Depreciation.  Most of the time your accountant will do this without any input from you.  But if you use equipment or a vehicle in your business, you should check that deprecation is being calculated and included on your return.

Keeping Good Records

So once you know what expenses to track, the key to getting the biggest tax deductions lies in keeping good records.  For most small businesses, the simplest solution is to use a software program set up specifically for this purpose, such as Quickbooks or Peachtree.  However, if you’re not that disciplined then make sure you charge your business expenses only to your business credit or bank card.  That way, they are at least in one place.  And if you’re not that disciplined?  Heck, just throw all the receipts in a box and give them to your accountant at the end of the year.

No matter what solution you choose, though, make sure you consistently record your expenses.  The last thing you want to do is scramble at the end of the year to find receipts and enter data.  That would be a nightmare.  Instead, set aside time each week (or more often, if necessary) to update your books.  If you find it overwhelming and you tend to put it off, consider hiring someone to maintain your accounts for you.  Remember – what you pay him or her is deductible as well!

Finding all those overlooked expenses can mean the difference between a huge tax bill and one that is more manageable.  While the things listed here will get you started, it’s a good idea to also speak with a tax professional.  Make sure he or she fully understands the nature of your business, so he or she can ask the right questions and make appropriate recommendations for your business write-offs.