Our SourceUP team gets a laugh every time we talk about that Schitt’s Creek bit with David talking to his dad about the “write-off” he was taking for his new bedding and lamps in his room at The Rosebud Hotel.  I’ve asked Jessica to put it on a recording for me so we can use it in action with clients.  The reality is that I typically find that clients are missing out on business expenses rather than taking too many write-offs as it relates to their business expenses.  

For those that need a quick refresher, a “write-off” is a business expense that reduces your taxable income, therefore, reducing your tax liability to the government.  That is a basic concept but one that I promise tricks even the most experienced business owner.  Identifying the business expenses and ensuring you are keeping proper record is something that is critically important.  If you are a business or even a 1099 contractor/self-employed, you should be tracking these expenses on a regular basis … not just in December.  

**If you receive a 1099 from any company in the year, you have the ability to also provide business expenses to reduce the taxable income for your annual taxes. **

Ok, so let’s dig into what would be considered business expenses and what are items that are frequently missed. 

Easy Peasy Business Expenses:

• Cell Phone Expense for Owner or if you receive a 1099 – a good monthly amount if you are connected to a family plan is $65
• You can provide a cell phone reimbursement for employees – use $65/monthly
• Internet at your office location and home if you work from home partially or entirely
• All software that supports the business: Canva, Google/Microsoft, Password Manager, CRM
• Office supplies to support your business: printer, paper, markers, pen, stamps, envelopes
• Technology: Printers, laptops, iPads, Phones, Remarkable/XNote
• Marketing & Advertising Expenses: including consultants, branded items, social media support, creative work
• Meals – this one is sticky – if you have a meal/coffee with a potential client, employee, or other, you can only write off 50% of it.  Your CPA will help you navigate this on your annual taxes.  However, if you are hosting a quarterly event with the entire team or a holiday dinner, that is 100% tax deductible.  We create a separate line item on the P&L to manage this so we can get the proper deduction.  

Next Level Business Expenses:

• If you have a home office, work with your CPA to take a portion of the home for business expense
• You can write off car mileage OR you can have a company car that is paid for by the business.  If you have a company car, you will need to meet the IRS guidelines on weight.  Once you have this properly on the balance sheet, you can take all expenses for the car as a business expense (Tires, maintenance, car washes, insurance, etc)
• Retirement Plans – this is one of my favorite levers to use for building an attractive benefits package while also providing some benefit to you and your team.  You can easily create a Simple IRA or 401K that will have a matching component.  Those matching funds are business expenses.  
• You can pay your children – this is outlined in detail by our partner at Accupay.  This is a very smart way to reduce your taxable income, and you can divert those funds into a Roth IRA.  There are federal limits so if you want to explore this, read the link above from Accupay.  Or feel free to reach out to us for guidance.

Maintaining business expenses throughout the year and continuing to elevate your opportunities will always help you manage that year end stress.  If you have questions about what could be considered a business expense or what exactly you are being taxed on, set up a meeting with Christina to learn more about working together or contact us here.