Tax Season for Small Business Owners

Today I wanted to talk about tax season as a business owner. It’s not nearly as glorious as a tax season for a non-business owner who works a 9-5, let me tell you. The reason is because not only are there way more things to consider and write off, but also in the end you’re going to be forced to pay taxes instead of collect them.

There are ways to get your tax payment down by writing off certain things, though, and if you’re not profiting then writing off a loss can actually get a payment back through your taxes for the things you wrote off. That’s only the case if your business did not make enough money the previous year, though.

So without further a due, here’s a list of some of the best tax write-offs to take advantage of as a small business owner getting ready to fork up a payment to Uncle Sam.

1. The studio write-off

The first write-off worth mentioning is the studio write off. Whatever area you consider your work area, with all your equipment and paperwork in it, can be written off of your total tax payment. Let’s say you have 15% of your apartment or house dedicated to your work equipment. This would mean that you can write off 15% of your total mortgage or rent for the whole year. To my knowledge the maximum amount of space to write off is 15%, with the exception of if your entire place is used specifically for business and nothing else. This is only the case if you don’t live where you work, for instance if you have a studio you pay separate rent for. This is one of the greatest write-offs you can make for your business.

2. Advertising and business expenses

This comes in at number two, and it’s going to take a lot of effort to get all of this information. Where did you spend? Try to write off every cent, but realize that if you don’t have receipts for such payments made then you might reconsider even writing them off. You don’t want to face an audit or some other kind of tax problem. Having said that, do your best to round up as many payments as possible. If you’ve been investing in yourself all year you will find that you can write off thousands upon thousands of dollars from the year’s work.

3. Vehicle expenses

This one is pretty cool, too. Did you buy a vehicle for use with your business? Even if not, you can still write off all the miles and gas used when driving your vehicle for work. In this case you might be writing off a lot of miles if you’ve been doing a lot of meeting .

4. Food and entertainment

This is one of my favorite things to write off because any business meeting of any kind can be written off completely. So if you met somebody for lunch to discuss business, you get to write off the entire bill from that lunch visit. Entertainment includes other things as well.

5. PayPal fees and other fees

Fees can be written off. You may not think it is a big write off but when you put the numbers together, that 3% that PayPal takes from each payment can end up being a multi thousand dollar write-off. Those 3% tickets add up throughout the year and hundreds of payments later you might be looking at quite the hefty PayPal fee for the year. This is an excellent tax write-off and should not be overlooked.

6. 401k retirement plan

This is a really good way to keep money in your pocket while also writing off as much as possible. If you set up a 401k retirement plan for yourself (since you’re your own employee), you get to write it off. So if you want to convert some of your savings into a 401k retirement plan, you can write off the full amount you put into that retirement plan. This is pretty awesome considering the money stays in your pocket and yet you don’t have to pay taxes on it.

7. Cell phone bill

In most cases you can write off your cell phone bill as long as it is primarily used for marketing and business. Try to avoid long phone calls to mom on this phone if you expect to write it off. Sometimes it’s a better idea to have a second prepaid phone just for family, and to keep your main business line open only for business so you can write the bill off entirely without worrying about audit or issue.

8. Other write-offs

While we didn’t cover every single write-off you can make, there are a couple more worth mentioning. If you worked a 9-5 over the course of the year, you get a little bit taken off of your tax payment. If you worked and made more money from your 9-5 than your business, you might find you actually receive a tax return instead of having to pay into business taxes. Writing off any W9 form from work is a good idea and practice. Aside from that other practices include writing off the interest paid on mortgage. For me this is going to be a massive $8,000 write-off for myself, but being that a lot of people reading this aren’t home owners, we’ll not go into detail. You can also write off repairs done to your work vehicle, medical expenses for your family (which are personal write-offs, not business write-offs) and education. Writing off these things can easily bring you a better tax payment in the end.

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Note: This is not to be considered as financial advice.