This year is drawing to a close, and it’s time to tally up all of the many ways your business will save money this year. Wait. You don’t have a multitude of ways to save money? Where are all of your deduction? They are your lifeline in a sea of never-ending taxation. Here, use these and don’t tell anybody.
Send Out 1099-Misc Forms
Making sure you’re not taxed on business expenses is one of the best ways to lower your tax burden. Duh. But how do you do this other than keeping track of your receipts? Well, LibertyTax.com advises to send out 1099-Misc forms for all vendors that you spend more than $600 with during the year.
By doing this, you’re reporting income to another business but, more importantly, you’re proving that you actually spent money on a business expense. If push comes to shove, you can prove that you actually did spend money on those goods or services.
Donating Unsold or Unused Inventory
If you have unused inventory, consider donating. Why? Because you’ll get a tax deduction for it. Then, you can take the money you saved and buy new inventory. This works especially well when you sell perishable goods – you would have to write them down anyway. Might as well give them away and let someone else benefit from them while they can. Just keep in mind that donations greater than $500 require more rigorous reporting.
Deduct Educational Expenses Related To Your Business
This is probably one of the best ways to keep your income down. Educational requirements are normal in many industries like finance, law, and accounting. If you’re a professional, it’s almost a given that you’ll have to do some kind of continuing education. However, even if you’re not a professional, you can still go to educational seminars, spend money on continuing your education in a vocational school or even an apprenticeship.
All of these educational efforts are tax deductible as a business expense. So, don’t be afraid to spend money here. You’ll become better at what you do and you’ll also end up saving yourself a significant amount of money.
Keep All Receipts
Make sure you’re keeping all receipts from all business expenses. Many business owners slack on this one, and throw away receipts under $75 for things like business meals and entertainment. Why? Because the IRS generally doesn’t require that you show documentation for expenses under this dollar amount. However, it will require you to show proof of those expenses if you’re ever audited.
Now, realistically, you could take all expenses that are under $75 each and create some kind of proof – but you would need to detail the time, place, person or company you spent money with and other pertinent details about the transaction (i.e. what it was for).
Of course, all this can be gleaned from the receipt itself, so the logical question is, “Why not just keep the receipt?” It makes things simple. In fact, it’s actually not too difficult to find applications for your smartphone where you snap a photo of the receipt and then upload it somewhere. That way, your receipts are safe and you can toss the crumples of paper in the wastebasket.
Jeremy S is passionate about small business success. He enjoys writing about the tips and tricks to great money management for small operations.