Listen to my podcast Benefits of Hiring a Bookkeeper with Christine Matlock. This podcast was done by my long-time friend and coach, Ben Florsheim. To check out more of his podcasts click here.
When it comes to owning a small business, every dollar that you save can help grow your company. One of the easiest ways you can retain more of your revenue is with tax deductions. Also called tax write-offs by many, tax deductions help lower your tax liability (reduces your taxable income) and lessens your tax bill at the end of the year.
Determining what meets the IRS’s definition of a tax deduction isn’t as cut and dry as some may think, however. A Reno bookkeeper can help your small business manage your financial statements and organize your tax write-offs for maximum savings. Learn more about tax deductions below, and connect with a Reno bookkeeper from Prosperity Concierge for small business bookkeeping services that are customized to meet your needs.
As stated above, tax deductions lower your taxable income and, as a result, the amount of taxes owed. Deductions, or write-offs, are expenses that a business owner incurs over the course of the fiscal year that can then be applied against their gross income. Typically, tax deductions are expenses that have been made to produce additional income. These tax write-offs are essentially subtracted from your taxable income to determine how much tax will be owed at the end of the year. It’s important to note that tax deductions are subtracted from your income before you calculate your tax and are not subtracted directly from the taxes you owe.
The IRS has determined that tax deductions must be deemed as either ordinary or necessary for the functionality of your business in order for it to pass as a legitimate write-off. Let’s clear up some of the ambiguities of tax deductions.
An ordinary business expense is one that’s classified as being “common and accepted” in your industry. This may include advertisement expenses, purchasing common supplies, and business travel costs. A majority of businesses in any industry have these types of expenses, making them ordinary.
A necessary business expense is classified as being “helpful and appropriate” for your trade or business. These are expenses that need to be made for you to operate your business but aren’t essential for all businesses. Each industry has different needs, so what might be necessary for one business may not be necessary for another. For instance, if your business is related to the construction industry, you’ll likely have to purchase expensive heavy-equipment to operate accordingly, whereas a hairstylist needs shears and hot tools to do their day-to-day job. Each example is used to help boost profits in their respective industry’s but wouldn’t be an appropriate expense in a different industry.
Many business owners are worried about what the IRS considers to be a plausible tax deduction that they simply don’t record any deductibles and wind up owing much more on their taxes than they should. If you have a legitimate business expense, don’t be afraid to claim it for your taxes. If the expense is truly ordinary or necessary for your business then taking the deduction is worth it. To determine what qualifies as an ordinary or necessary business expense, ask yourself a few questions:
Christine Matlock, owner and founder of Prosperity Concierge, knows just how important accurate financial management is for your small business. As a small business owner herself, Christine has spent much of her time prioritizing financial recording for maximized earnings.
Christine is a local Reno bookkeeper and financial coach who’s proficient in handling business expenses, creating budgets, using QuickBooks, and developing financial confidence. See how she can help your business improve its bottom line!
In this time of unprecedented uncertainty and confusion, small businesses have been under immense pressure. From managing new regulations to trying to keep staff on board, a lot of small business owners have been left out to dry which makes it imperative that you are keeping track of all your finances. Not to mention, tax season has just passed, and IRS attention would cause even more problems for your business. This blog will offer some small business development tips from a trusted Reno bookkeeper on how to properly organize your books.
This is the first step to complete a financial organization, and if you start off unorganized it is extremely difficult to try to clean up the mess. At first, incorporating the two can seem unharmful, but can quickly spiral out of control. Set up a business account strictly for your business needs so you can maintain a budget, organize accounting records, and keep your business finances in order.
Bookkeeping software is now the easiest and most efficient way to keep track of your books. These types of software have been around for a while, but they are now incredibly user-friendly and personalized. It may take some trial and error to fully understand the software, but it will save you loads of money, time, and stress in the future.
With this type of software, you can easily keep track of your accounts payable, receivable, payroll, bank accounts, and inventory. If you’re still crunching and entering numbers manually, we highly recommend you start trying out some new software. This way you can still keep the paper documents while learning the software.
Having a good credit card can be your secret weapon as a small business owner. Small business credit cards offer an abundance of perks like higher credit limits, discounts on business supplies, reward programs, and reporting tools. With all these perks you can easily build up your credit and eventually lower your interest rates.
Leaving an audit trail means printing records of everything at the end of each month—or quarterly—and hanging on to all invoices and checks. This can help you retrace your bookkeeping, improve accuracy, prevent fraud, and find missing transactions. When running a small business, everything counts.
You should also be prepared for a computer crash and loss of data. Make sure you are constantly backing up and checking your bookkeeping software in case your computer decides to quit on you. If you do happen to be all-digital, it could be a good idea to start printing and saving paper documents as well.
As with backing up your files monthly, you should also prepare―and thoroughly analyze— your statements monthly. This includes balance sheets, income statements, and cash flow statements. If you do this personally, you will be able to see your business through a different lens and be able to identify and correct problems in a timely fashion.
Prosperity Concierge was founded—and owned by—Reno bookkeeper Christine Matlock. As a small business owner herself, she understands the range of issues a small business owner with no corporate protection must face on a daily basis, and one of the most time consuming is bookkeeping.
Christine is a local Reno bookkeeper and financial coach who’s proficient in handling business expenses, creating budgets, using QuickBooks, and developing financial confidence. Christine is eager to improve the financial stability of your small business through Reno bookkeeping, financial coaching, and consulting. Connect with us today to schedule a meeting with Christine!