{"id":64,"date":"2021-10-21T14:28:20","date_gmt":"2021-10-21T14:28:20","guid":{"rendered":"https:\/\/www.iw-cpa.com\/blog\/?p=64"},"modified":"2021-11-01T14:30:34","modified_gmt":"2021-11-01T14:30:34","slug":"are-you-tracking-absolutely-all-of-your-tax-related-business-expenses","status":"publish","type":"post","link":"https:\/\/www.iw-cpa.com\/blog\/are-you-tracking-absolutely-all-of-your-tax-related-business-expenses\/","title":{"rendered":"Are You Tracking Absolutely All of Your Tax-Related Business Expenses?"},"content":{"rendered":"

\"WomanIf you\u2019re self-employed, understanding what\u2019s deductible and recording all of your business expenses should be priorities.<\/em><\/p>\n

When you work for yourself, accurate accounting is critical. The IRS pays special attention to tax returns prepared by sole proprietors. Not only does the agency try to determine whether all taxable income has been recorded, but they also scrutinize business expenses that are claimed, since some taxpayers blur the lines between personal and business purchases.<\/p>\n

We\u2019re not suggesting you hold anything back when you\u2019re tracking your tax-deductible business expenses. We want you to claim every penny that the IRS says is permissible. This is especially important if your company makes a lot of money. You\u2019ll need to document everything you can to offset your income and minimize your tax obligation.<\/p>\n

How do you ensure that all of the money you\u2019re spending to make money ends up somewhere on your IRS Schedule C? Let\u2019s look at steps you can take.<\/p>\n

Review the Schedule C<\/h2>\n

\"tax<\/p>\n

The actual IRS Schedule C form contains broad expense categories. You may need to dig into deeper explanations of them.<\/em><\/span><\/p>\n

If you\u2019ve never completed a Schedule C before, it\u2019s especially important that you familiarize yourself with it. You can view a copy of the 2020 version here<\/a>. Pay special attention to Part II Expenses<\/strong>. The form breaks down business expenses into specific categories. But what\u2019s the difference between Office expenses<\/strong> and Supplies<\/strong>? What does Other business property<\/strong> mean? Not only do you have to know which expenses are deductible, but you must be sure to include them in the right category.<\/p>\n

The IRS has a special publication devoted to discussion of deductible business expenses. You\u2019ll find links to it here<\/a>. It\u2019s a lengthy document, but there\u2019s an interactive table of contents that lets you jump right to the section you want. You don\u2019t have to read the whole thing, but you might bookmark it so you can consult it when you have a question. There are many questions on the Schedule C that may require additional explanation.<\/p>\n

You might want to visit the IRS instructions<\/a> online. This page displays a detailed outline of the form, section by section and line by line, so you can find what you\u2019re looking for easily and click a link to get there.<\/p>\n

Keep Detailed Records<\/h2>\n

This will be challenging if you\u2019re doing your bookkeeping manually. You\u2019ll need to set up a system of folders or envelopes or whatever works for you and separate receipts by either month or Schedule C category. If you know your way around Excel, you could set up a spreadsheet divided by category and enter receipt information as it comes in. This will make calculations easier, too.<\/p>\n

Do make notes on your receipts so you\u2019ll know why you thought the purchases would be deductible. You might also indicate whether the receipt was already entered in your master list, so you don\u2019t have duplicate entries. Don\u2019t forget about credit card charges and checks you\u2019ve written for tax-deductible purchases that didn\u2019t generate a receipt. Enter them in your master list as you go. If you\u2019re ever audited, you\u2019ll need copies of them for documentation. If you get electronic receipts in email, save them in a folder on your computer and record them.<\/p>\n

\"tax<\/p>\n

You can categorize your tax-related business expenses using personal finance or accounting applications.<\/em><\/span><\/p>\n

There are numerous personal finance and small business accounting applications that allow you to import your online banking transactions and categorize them. These include QuickBooks<\/a> (online and desktop), Mint<\/a>, Quicken<\/a>, and Simplifi by Quicken<\/a>. Their category lists can often be modified, so you can make sure your tax-related expenses are organized accurately.<\/p>\n

Don\u2019t Dismiss the Unusual<\/h2>\n

There are some legitimate tax deductions that the IRS doesn\u2019t necessarily include in the Schedule C instructions, but which it will accept. For example, H&R Block reported on a case where the cost of cat food was considered a business deduction (a scrapyard was trying to attract wild cats to keep snakes away). A professional bodybuilder was able to claim his purchase of ProTan Muscle Juice Professional Posing Oil as an acceptable business expense.<\/p>\n

We\u2019re not recommending that you spend a great deal of time looking for obscure tax deductions. But think about your purchases as you make them to see if they\u2019re tax-worthy.<\/p>\n

All of these suggestions may sound time-consuming. They can be, until you get into the habit of tracking all of your tax-related business expenses, but it does require constant diligence. We can help ensure that you\u2019re only claiming legitimate deductions and advise you on those you might question. We can also prepare and file your return for you and\/or help with year-round tax planning. Contact us for a consultation.<\/p>\n

Call our office now at\u00a0781-883-3174<\/strong>\u00a0to discover how we can decrease your tax obligations. We welcome new clients and offer a\u00a0free consultation<\/a>\u00a0so contact us today.<\/p>\n","protected":false},"excerpt":{"rendered":"

If you\u2019re self-employed, understanding what\u2019s deductible and recording all of your business expenses should be priorities. When you work for yourself, accurate accounting is critical. The IRS pays special attention to tax returns prepared by sole proprietors. Not only does the agency try to determine whether all taxable income has been recorded, but they also […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":{"0":"post-64","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-business-tax","7":"entry","8":"has-post-thumbnail"},"_links":{"self":[{"href":"https:\/\/www.iw-cpa.com\/blog\/wp-json\/wp\/v2\/posts\/64","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.iw-cpa.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.iw-cpa.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.iw-cpa.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.iw-cpa.com\/blog\/wp-json\/wp\/v2\/comments?post=64"}],"version-history":[{"count":4,"href":"https:\/\/www.iw-cpa.com\/blog\/wp-json\/wp\/v2\/posts\/64\/revisions"}],"predecessor-version":[{"id":69,"href":"https:\/\/www.iw-cpa.com\/blog\/wp-json\/wp\/v2\/posts\/64\/revisions\/69"}],"wp:attachment":[{"href":"https:\/\/www.iw-cpa.com\/blog\/wp-json\/wp\/v2\/media?parent=64"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.iw-cpa.com\/blog\/wp-json\/wp\/v2\/categories?post=64"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.iw-cpa.com\/blog\/wp-json\/wp\/v2\/tags?post=64"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}