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Even those dollar-here and a dollar-there out-of-pocket cash expenses can add up to a tax savings. |
Tax Tip #1. Your business expenses are deductible even if you paid them from your non-business bank account, personal credit or debit card, or cash. Take a few minutes and go through all of your expenses for the year. If the expenses were for your business, deduct them. (Does not apply to corporations).
Tax Tip #2. Normally, the cost of your inventory (goods for sale) cannot be written off until sold. But if you have unsalable goods—damaged, out of date, out of fashion—you can write off that inventory immediately.
Tax Tip #3. Hire your kids and save a bundle in taxes. You can pay your children under the age of 18 as much as $6,300 a year, write off the wages as a 100% tax deductible payroll expense, and the children owe no federal income or Social Security tax on the income earned.
Tax Tip #4. Be careful when labeling expenses “entertainment.” Business expenses such as advertising and promotion are 100% deductible, but entertainment is only 50% deductible, and it’s a “red flag” to IRS auditors. Don’t call an expense “entertainment” unless it really is.
Tax Tip #5. You can go back to school, further your education in your current business, or learn more about record keeping and computer skills, and get a business tax deduction for the cost of tuition, books, fees, and even travel.
Tax Tip #6. You cannot deduct charitable donations as a business deduction (unless you are a corporation). If, however, you purchase an advertisement in a charitable organization’s directory, or help sponsor an event, the cost is fully deductible as an advertising expense.
Tax Tip #7. You can put some of your business profit into an IRA or a SEP-IRA retirement account, and not pay income taxes on the profit until you withdraw the money after you retire. You have until April 15, 2015 to set up and contribute to an IRA or a SEP-IRA for the 2014 tax year. You can figure your 2014 income and taxes, and then decide if you want to shelter some of it in a retirement plan.
Tax Tip #8. Finally, and one almost sure way to reduce your taxes, is to re-examine every purchase, every expense you made during the year. Make sure you’ve taken all the business tax deductions you are entitled to: expenses you didn’t record in your financial records, expenses you didn’t think were deductible, “personal” expenses that qualify as business expenses. Even those dollar-here and a dollar-there out-of-pocket cash expenses can add up to a tax savings. Neither the IRS nor your accountant is going to know about a deduction you forgot to take. It’s entirely up to you.
Eight Great Tax Tips is excerpted from the book Write It Off! Deduct It! © 2015 by Bernard B. Kamoroff. Questions, please call 707-459-6372 or email kamoroff@bellsprings.com
