We published a post last week with some general tax tips - one of them being, "know your deductions." We thought we would dive into some tax deduction ideas in a bit more detail this week. Some of this may help you with your 2010 taxes and some ideas may be helpful for planning ahead for 2011 taxes.For small business owners, tax time can be especially tricky. You probably have income that came from many different sources and have multiple business deductions, making the process a bit more complicated than it is the average tax payer. It is imperative to have an understanding of tax code and deductions, even if you have your taxes done by an accountant, because you need to be planning ahead and keeping relevant information throughout the year.
One of the largest deductions available to small business owners who work out of their home is the home office itself. People used to think that taking a home office deduction raises an audit flag, but that isn’t necessarily the case. If you have an area of your house that you use exclusively for work, go ahead and claim it. Just remember to keep things like utility bills so that you can calculate how much to deduct.Other deductions that can help you out include transportation and meals. If business is discussed at a meal or if purchasing a meal out was necessary due to overnight business travel then it is usually deductible. It can be helpful to write on the receipt why it was business-related so you don't forget when tax time rolls around. For transportation, this deduction will involve either how much you paid for gas for business purposes during the year or how many miles were driven for business needs.
Also, remember that if you have any certifications or licenses you or members of your team need for the job, that expense is also deductible. Of course, equipment and supplies needed for business can also be deducted. Just be sure to have a receipt on file for any expense over $75 and keep those receipts for seven years.
When in doubt, using a professional tax preparer can be a good investment to make sure everything is reported correctly and you won't have a problem if you're ever audited. They also often find additional deductions that you may have missed.
Toffer Grant is PEX's Founder and CEO. He founded PEX in 2006 as a prepaid card solution for small businesses. His background in the prepaid industry began at Clarity Payment Solutions, where he initiated 65 prepaid card programs in consumer, corporate, and emerging verticals of the prepaid card industry.