Business Tax Deductions

Maximize your tax savings by deducting all eligible business expenses
By John Riddle Small business owners generally loathe tax time. But if you take all of the business deductions allowable, you can usually lower your tax bill significantly. Recording and reporting deductions doesn't have to be drudge work. With a solid grasp of the expenses you can legally deduct and with a little help from tax software or a tax professional, you can:

1. Reduce the time spent calculating deductions
2. Be certain you're saving the proper receipts
3. Be certain you're filing the proper forms
4. Minimize the chances of an audit

 

Check with the IRS

Go straight to the ultimate source for information on deductions you can claim on your federal business taxes.
Try: The IRS Small Business and Self-Employed One-Stop Resource includes an overview of business expenses you can deduct. IRS Publication 535, updated each year, provides a detailed overview of deductions.

Use the proper forms

The forms on which you report your deductions depend on your company's legal structure: sole proprietorship, partnership, LLC or corporation. For instance, sole proprietors must file Schedule C or Schedule C-EZ of Form 1040; partnerships must file Form 1065; corporations must file Form 1120-A, 1120 or 1120-S; and home-based businesses must file Form 8829.
Try: Find the proper forms for filing your business deductions at IRS.gov.

Know your home-based tax deductions

Businesses run from the home are eligible for a variety of deductions, including deductions for a home-office, cars, furniture, equipment, supplies, business travel and more.
Try: Download an e-book on Home Business Tax Deductions or take a look at SmallBusinessBrief.com for 10 deductions home-based businesses can claim.

Stay within the law

Don't tempt fate by overstating deductions or attempting to claim a deduction for expenses that aren't allowable.
Try: Complete Tax provides a list of common business deductions as well as a list of nondeductible expenses. Bankrate.com offers a list of a dozen deductions you might forget about.

Get tech help

Business tax software programs can help guide you through the process of recording and reporting deductions.
Try: Ask which software program your accountant or CPA recommends or check out one of the leading software programs, Turbo Tax, which also features a Deduction Finder to help you zero in on deductions you may have forgot.

Hire a professional

Running a business 24/7 doesn't leave a lot of downtime for learning about tax deductions. To make sure you're taking advantage of all the deductions you're entitled to and that you're reporting them correctly, get help from a CPA or an accountant.
Try: Find seven tips for hiring a tax pro from Microsoft Small Business Center and search for a qualified professional at Accountants World or the CPA Directory.

• Keep accurate records of all purchases and expenditures throughout the year; when it's time to file your tax return, you'll be ready.
• Be careful not to spend limited resources just because it's deductible. You don't want to end up with stuff you don't really need. Keep the cash instead.
• Make sure you file all of your tax forms on time.