As tax time approaches, the aim of every small business owner is to maximize their deductions, make a great profit and avoid getting audited.
Read below for 6 mistakes that, if you overlook, could cost you a lot of money:
1. Deducting Unpaid Debts - If You Have a Service Business If someone stiffs you, the bad debt may not be deductible if you are in the service business. Bad debt deduction guidelines are below:
Goods. If your business sells goods, you can deduct the cost of goods that you sell, but are never paid for.
Services. If, however, you offer services, no deduction is allowed for time you devoted to a client or customer who doesn't pay.
2. Forgetting to Deduct Interest That You Paid If you use credit to finance business purchases, the interest charges are 100% deductible.
3. Deducting 100% of the Cost of New Software Generally, any new software that you buy must be depreciated over 36-months, but there are exceptions:
Computer software purchased through the end of 2010 is eligible for a Section 179 deduction, meaning 100% of the cost can be deducted in the same year purchased
4. Deducting a Charitable Contribution Twice If you've got an old desktop computer, office chair or printer, donating it to a nonprofit can make you feel good and also reduce your taxable income. However, if the equipment has been fully depreciated (written off), you can't claim a deduction. For example, if you bought a new computer in 2003, and have been deducting the value for 5 years, when you turn around and donate that computer to the local school this year, you cannot deduct that amount.
5. Forgetting to Deduct Taxes on Your Taxes Taxes incurred in operating your business are generally deductible. This can get tricky, so pay attention to learn how and when they are deductible:
Excise and fuel taxes are deductible
State tax can be deducted on your federal return as an itemized deduction (but not as a business expense)
Real estate tax on business property is deductible, along with any repairs, upgrades & maintenance
6. Missing Out On Overlooked Deductions The following are additional routine deductions that business owners often miss:
Bank service charges (i.e. the annual fee of your checking account)
Business-related magazines and books (which helps for those of us with Amazon.com addictions)
Postage & mailing supplies
Parking and meters
Credit union fees
Keep in mind that Virtual Assist USA has a brilliant, quick tax preparation bookkeeper on staff, Lisa in New Jersey, who is also a Quickbooks Certified Advisor.