Author: Pamela Swift

Article Contributed by Satish Patel
Tax seems like a boogeyman giving nightmares to those businessmen who have zero accounting and tax background or knowledge to find their way out of this chaotic labyrinth.
The problem begins when small businesses wait till the very end to gather the required details and file returns. Rush job makes it difficult to approach your tax in a planned manner resulting in paying more than you actually need to.
There are many deductions which get generally ignored as they might seem insignificant or one is just not aware about benefits of such deductions. Below are list of 15 such deductions that every businessmen should know to get smart and save money which can be better utilized for your business growth:
I. Startup and Organizational Costs Deductions: When someone begins a start-up business, he or she often incurs expenses just to get the business up and running. As part of the American Jobs Creation Act, taxpayers can deduct up to $5,000 of start-up costs and $5,000 of organizational expenses incurred in the first year of their small business. Start-up expenses are the costs the business owner has for setting up an active trade or business. If these costs meet the following tests, they may be recovered through a process known as amortization:
The costs would be deductible if they were paid or incurred for an existing trade or business.
The costs must be paid or incurred before the small business begins operations.
Examples of costs that may qualify as start-up expenses include the following:
· A survey of potential markets.
· Analysis of available facilities, labor, supplies, etc.
· Advertisements for the opening of the business.
· Salaries and wages for trainee-employees and their instructors.
· Travel and other necessary costs for securing prospective distributors, suppliers, or customers.
· Salaries and fees for executives and consultants and for other professional services.
Start-up expenses do not include deductible interest, taxes, or research and experimental costs. Expenses not deductible within the first year can be amortized over 15 years. Business owner may be eligible to deduct some of their business startup costs up and organizational costs. Again there are limitations on this deductions and needs to be checked by professional tax advisor.
II. Home Office: A home office must be a separate room in business owner’s home to do business and accounting. Part of a living room or bedroom will not count. A percentage of utility Bills, home owners insurance, property tax, mortgage interest, refinance fees, repairs and maintenance, cleaning supplies, office decor, etc. are deductible. Find out the percentage by dividing the square footage of the office by the square footage of the entire house. Even if you don’t take the home-office deduction, you can deduct the business supplies you buy. Hang onto those receipts, because these expenditures will offset your taxable business income.
III. Personal Assets used for Business Purpose: Business owners who use their personal computer for business purpose can claim deductions for depreciation on the fair market value of such assets. Check on maximum ceiling available to claim such a deduction. It varies case to case.
IV. Mileage or Vehicle: There are two ways to take a vehicle expense. One is to take the mileage basis use when picking up product, supplies, office supplies, meetings, handing out advertising or business cards, meals and entertaining clients, etc. The other way is to take the expense of using the vehicle: fuel, parts, mechanics, oil changes, etc. Along with taking expenses, one can also depreciate the vehicle.
V. Advertising & Promotion Cost: Business owners can claim deductions for costs involved in preparing Business cards, newspaper ads, information packets handed out, free samples, flyers, product testing, videos and CD’s all can be claimed under business expenses. Money paid to hire temporary help with promotional activities like delivering flyers, product, stuffing envelopes or for even cleaning office and car, etc. can also be claimed under business expenses.
VI. Travel expenses related to business: Unreimbursed travel expenses are tax-deductible. The IRS recommends keeping a log of your expenses and receipts. Transportation, (such as airfare) lodging and even dry cleaning can be deducted, and half of any business meals. You also can deduct expenses for business associates traveling with you. You can’t write off expenses for family members or friends if they accompany you, unless they are employees and are professionally involved in the business end of the trip, but it is fine to deduct your part of the trip if it is for business.
VII. Research and Experimental Costs: Costs of research and experimentation may be deductible if it is chosen not to list them as capital (long-term) expenses. There are many restrictions and qualifications relating to this deduction.
VIII. Disability Access Costs: In case improvements or remodeling has taken place for business facility to accommodate customers and employees, business becomes eligible for a deduction for these expenses.
IX. Carrying Charges: Carrying charges are fees and interest on property. Some carrying charges may be deductible if they are not capitalized.
X. Dues and Subscriptions: Dues to professional organizations and magazines that have to do with particular trade or business can be part of deductions.
XI. Educational Expenses: Classes or seminars that improve business can be claimed under deductions.
XII. Gifts: Gifts to clients and associates are deductible.
XIII. Laundry and Cleaning: This includes uniforms and Protective clothing and also owner’s clothing when they go out on touring for business purpose.
XIV. Communication expenses: Cell phone, long distance calls on home phone, extra phone lines into home for business, fax or Internet can be claimed as deductions.
XV. Retirement Plan Costs: As owner of a small-business and having recently established a retirement plan for the business, the business may be eligible to receive a non-refundable tax credit for expenses incurred to implement the plan. The tax credit may be claimed for a maximum period of three years for retirement plans established after 2001.
Items such as paper clips, bank charges, credit card charges and home office expense seem small and unimportant at the time, but multiply those little things over a year or two and then multiply it times 35% and it can add up to quite a bit of money that should be in your pocket rather than in the federal fund.
To learn all the ins and outs of the tax code and really start saving on your business taxes, get in touch with professional tax consultant who can guide you and give you tips to save money during this severe liquidity crisis. The above information is general in nature and it is advisable to contact a professional who will advice after thoroughly checking individual business type and requirements for tax savings and investments issues.
About the Author:
Satish Patel is the CEO/President of Analytix Solutions LLC, a leading provider of back office support services like Bookkeeping, Accounting & Tax preparation. He has more than two decades of experience in handling tax related issues for small to mid-sized firms including his several personal business ventures.