Hopefully you are not like me and just getting ready to file your taxes for 2010. If you are and you have a corporation, they are due in 9 days!
Most of you I’m sure are not the extenders and procrastinators! However, it is September and we are nearing the end of the 3rd Qtr for 2010!
It’s a perfect time to make sure you are doing a good job and including everything necessary to keep your books in good order and save as much money as possible. It’s not too late to go dig up those receipts and enter them into your books.
Do you know the difference between a deduction and a credit?
A deduction is subtracted from your income. You pay taxes based on your income. So anything that lowers your Gross Profits is a good thing. If your income is $10,000 and you have a $500 deduction then you only pay taxes on $9,500.
A credit is a subtraction from your taxes. If you owe $10,000 in taxes and you get a tax credit for $500 you then only owe $9,500 in taxes.
You might want to look over this list and make sure you are taking the deductions, collecting the receipts and accounting for these expenses.
7 Often Overlooked Deductions:
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- You’ll want to check out IRS Publication 334, Tax Guide for Small Business (not for corps) if you are interested in tax credits available to businesses. Like hiring from targeted groups with special needs, efficiency credits, etc You don’t know you might get an extra break!
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- If you have a separate phone line (or no personal life), you can deduct the cost of your phone (cell too).
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- Small Employer Pension Plans – if you qualify you might be able to set one up for yourself (IRS form 8881). With this plan you can deduct the money you contribute to most types of retirement plans.Spending some money visiting a financial planner can often pay for itself. I had never been to one until this year and in our first visit he pointed out a way to save me $8,000 which pays for his fees and then some! It is wise to invest in some guidance with your hard earned money! Who knew! Wish I had done this a decade ago!
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- If someone owes you money or didn’t pay for their items, you may be able to deduct the amount of the bad debt from that customer or gallery.
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- Dues or fees you pay to a professional organization (like SNAG) are deductible business expenses. So are charges for subscriptions to magazines that feature your profession. This includes attending the event, dues, a museum membership, etc
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- If you buy books, attend a class, hire a coach/mentor, attend a convention, these costs are deductible. You will want to separate them into direct education costs, travel costs and meals as they are all deductible at different rates.
- If you suffer losses due to theft, damage, act of God, you can deduct whatever is not covered by your insurance.
Don’t forget about mileage to shows or home parties.
Yes, but make sure you keep a written log book
The tax code is so poorly written that it’s almost impossible to know what deductions are legitimate. What about the software you use to edit your site photographs? Did you donate a piece for a charity auction? Little things add up.
Find a good CPA to do your taxes; not only will you have a deduction from the tax prep charges, a truly great CPA can find more overlooked deductions. In the long run, s/he will be worth far more than any fees you pay.
When you donate pieces to a charity you can only deduct the materials cost. You cannot deduct the retail value.
A CPA is a MUST! I’ve got a great one. She is affordable, friendly, caring and can work on your books no matter where you are, if you have Quickbooks.
Also if you work out of your home, you can deduct the expenses of that portion of your home and utilities as a business expense. If you rented a place, that would be an expense – your home workshop is too.
That space must be used for business only if you are going to use it as a deduction. You cannot use that space as a spare bedroom and then write it off as an office. You will need to move out all personal items (closet) and make it solely an office. You can also have your business pay you personally a rent check every month, especially if you are set up as a corporation.
When you go to sell your home there are some implications of these tax deductions that you will need to make sure you claim on your taxes as well.
It is a good idea to consult a tax professional before you take the home office deduction. There can be a nasty surprise when you sell the house, which may or may not be worth the deduction. It depends on your specific circumstances.
A % of business meals can be deducted as well as highway tolls.
There are lots and lots of deductions that can be taken (meals, travel, entertainment, home office expenses). My blog was just a list of 7 over-looked items. I recommend a good book (because accountants don’t always think of every expense you are incurring), a good accountant, and knowing what you can and cannot deduct!
Mileage is so important – also keep track of any tolls. I travel a toll road to my professional meetings once a month – over time, those tolls add up and make a tidy deduction!
These are great tips! Since I’m just starting out, I will make little folders for each category. I’ve already downloaded the IRS pubs on small business–Thanks Tonya!