Reducing Taxes By Keeping Track of Your Small Expenses
It is not uncommon for taxpayers to overlook several small tax deductions. The sad thing is these little but numerous deductions when summed up could run to hundreds or even thousands of dollars yearly. Your business is at risk overpaying taxes by repeatedly failing to make these deductions.
Reasons for not making some of these deductions are endless, sometimes we forget to make them while at other tines, we feel they are too little and are thus inconsequential.
Here is a list of frequently forgotten expenses.
- Out-of-pocket charitable contribution. Expenses incurred during fund-raising events, and other charitable events can easily be forgotten. They should be deducted as soon as they are incurred.
- Interest paid on loans, credit cards and credit lines if used for business purposes.
- Office supplies. Though the cost of office supplies seems like nothing, when added up over a duration of months, they be substantial. Do not get tempted to add them to your grocery list and pay for them from your pocket, you should separate your business office supplies from personal items and request that they give you a separate receipt.
- Reinvested dividends. Mutual fund dividends used to buy extra shares should also be considered and keep track of because they increase your basis (cost) which eventually lowers your capital gains if and when you sell the stock.
Other frequently forgotten expenses include:
- Transportation costs;
- Bank Fees
- Payment processing fees example pay-pal fees
- Dues and subscriptions
- Fees for advertising
Millions of taxpayers overpay their taxes yearly by overlooking one of the expenses listed above, do not be one of them.
- Keeping good records
- Tracking all those little expenses: keeping track of all these little expenses involves keeping receipts and bills and searching them out when you are ready to make the deduction. So many things can go wrong if you only rely on this method. As not all expenses are documented hence not all will be remembered and deducted.
The latter is usually more difficult than the earlier hence, keeping good records is the easiest way to save money on tax returns. Again, little deductions here and there when added up throughout the year can and will be a substantial amount.
How to Keep Good Records
- If you are running a small business, there are software programs like Peachtree or QuickBooks which you can use to take and keep strong and timely records of your expenses.
- Speak with a tax professional and seek help. Tell him or her about your business, day to day activities and your usual expenses.
- Set aside time to update your records, it can be done two to three times a week, if not everyday. You can hire an extra hand to help you make and keep these records but remember to inspect it from time to time because eventual responsibility of keeping good records according to the IRS goes back to you the owner.
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