It’s almost that time of the year again – Tax Day. And while we all dread this day, there are guidelines business owners should follow to assure that only what’s necessary will go to Uncle Sam, and that as much as your hard-earned money will stay in our own pockets.
Taxes and Coronavirus
With the recent outbreak of coronavirus and many jobs on-hold, tax write-offs are going to be even more important for many of you.
During this unprecedented time, the federal government has enacted the Families First Coronavirus Response Act. This piece of legislation outlines measures intended to protect the public from this pandemic. This includes public health safety including coronavirus testing, agricultural, food and welfare benefits, and the Emergency Paid Leave Act of 202 for those affected by the virus.
The Emergency Paid Leave Act of 2020 provides compensation for those who must take time off work due to coronavirus in the form of a tax credit. This includes emergency funding to help small-business owners pay for unemployment insurance. If your business is affected, make sure to take advantage of this benefit.
Additionally, cities across America are offering financial aid to specifically help small businesses. Cities like New York will offer no-interest loans to small businesses with fewer than 100 employees that show a reduction in sales since the coronavirus outbreak.
Certain cities are also providing grants of up to $6,000 for businesses with fewer than five employees. Freelancers can access this information and see if they qualify through their city’s Small Business Administration office.
Outside of these coronavirus-specific measures, we have compiled for you 10 tax write-offs that are especially useful for small businesses. They will help assure that you have a better understanding of your taxes and how to maximize your profits.
Generally speaking, expenses are deductible if they meet the following three guidelines set by the IRS:
- You incurred the expense in connection with running your practice.
- The expense is commonly accepted as necessary to run your practice.
- The deduction is based on precedent and is believed as being an acceptable expense.
10 Tax Write-Offs for Small Businesses
1. Advertising and marketing
Anything and everything you utilize to market your business can potentially be written off. This can be related to your website costs, such as hosting, development, design, stock photos, etc. Additionally, advertising costs from Facebook ads and Google Adwords are all deductible. Have you hired any freelancers to help you market yourself such as a quick hire from Fiverr? This is also included.
2. Home office write-offs
Do you work from home? If so, this is important to include. If you work out of your home, you can write off a portion of your rent, mortgage, phone service, utilities, Wi-Fi, property/renter insurance, etc.
3. Continuing and higher education
Becoming a massage therapist doesn’t come cheap, however, you might be able to deduct these costs. Furthermore, did you enhance your education this past year with any continuing education courses? If so, you can deduct these expenses in your taxes, including both online and in-person courses. That doesn’t only include tuition, but also educational literature and other relevant materials.
If you use your car for work, you can deduct certain expenses like transportation costs. This includes the cost of gas, as well as capital expenses like vehicle purchases and repairs. Alternatively, you can usually deduct your car expenses based on the standard mileage rate set by the IRS each year. It’s key, though, to accurately track your mileage of business-related trips to client appointments.
5. Licenses and certifications
Did you attain any licenses or certifications this past year? These usually don’t come cheap and usually recur on an annual basis. All related expenses, which can add up to thousands of dollars a year, can be accounted for providing tax credit.
General office supplies like computers, new chargers for electronic devices, pens, and filing systems count. Additionally, supplies to perform your specific specialty, such as massage tables, towels, uniforms, magazine subscriptions, massage oils, lotions, aromatherapy, and furniture can also be included as tax write-offs. Pss. This includes CBD CLINIC products.
Personal and professional liability insurance for any healthcare clinician can be included as a tax write off.
8. Professional associations
9. Legal-related expenses and accounting fees
You can deduct fees paid to lawyers and accountants, or other professional independent contractors who you hire for business-related purposes.
10. Business startup-related and expansion costs.
This includes investments you’ve made to start your new business this year, or supplies you have bought to expand your practice. These can all account for capital expenses and you can deduct a portion of these costs each year. There is also an option to expense these costs in a single tax year (up to a certain limit) based on your eligibility.
Do I Need to Account for My Barters?
It’s a common practice to use the “barter system”, that is trading a professional service, such as a massage, for other services, whether related to your business (e.g. printing business cards) or to your personal life (e.g. painting your house).
These trades are also taxable and should be recorded as taxable income. If you traded a session for the painting of your office, you must include the cost of the massage as income and take the painting expenses as a deduction.
However, if you traded a massage session for, let’s say, painting your house, then you have to declare the price of the massage as income but cannot deduct the painting service since it’s not business-related but rather personal.
User-Friendly Accounting Tools for Tax Write-offs
Now, since we are not all accounting professionals, there are many online tools and software out there that were created to help even the “layman” tackle this tax enigma. Among the most popular tools is Turbotax, and if you are still struggling and don’t have your own accountant, you can always go to tax preparation shops like H&R Block.
Just make sure to bring all your receipts and expenses records with you. And speaking about those receipts and expenses, tracking those on an ongoing basis with tools like Quickbooks can make your life much easier, not having to scramble around last-minute to salvage all those records. They now have an online version that is user-friendly for non-accountants, but accountants tend to love it too.
Keeper Tax is another super helpful tool that is connected directly to your bank account and credit card accounts and automatically finds tax write-offs among your purchases in real-time.
Take Away for Tax Write-Offs
Everything that you spend on your business adds up. Remember to:
- Keep your receipts and you can keep your taxes to a minimum.
- Be organized on an ongoing basis and save yourself from the last-minute, tax-day headache. Think broadly about potential tax write-offs.
Anything and everything business-related might offer a tax write off.
While it can be easier said than done, we recommend not putting off your taxes to the last minute. If you stay organized throughout the year, the process can be far less daunting. Additionally, being equipped with important knowledge of tax write-offs that can save you and your business from losing profits will help boost your bottom line and your overall success.
Furthermore, we encourage you and your family to stay safe. We are hopeful that life will return to normal soon.
Some Other Helpful Resources
Top 25 Small Business Tax Deductions: https://smallbiztrends.com/2020/01/small-business-tax-deductions.html
Top Tax Deductions for Massage Therapists: https://turbotax.intuit.com/tax-tips/self-employment-taxes/top-tax-deductions-for-massage-therapists/L2PW2Huo7