Keep More Money In Your Pocket
We have already covered all the dates to make sure you file on time so you won’t be subject to any penalties or interest. If you missed last week you can READ DAY 1 HERE. Be sure to mark your calendar with the dates that are appropriate for you!
This week is all about deductions. There are two separate tax systems in the USA (and most countries): one for individuals and one for businesses. As an individual you earn a W2 income and your cash flows like this: Taxes are calculated on gross earnings, taxes are removed first and then you have the rest to spend.
As a business your cash flows like this: Earn income, spend on allowable deductions, tax is calculated on what is left or your profit. Knowing all your allowable deductions helps you to keep more of your money.
There is a great book called “Save on Your Taxes Big Time” by Sandy Botkin in it he outlines many deductions that I often see business owners miss. If you are ever wondering if an expense is allowable or not this book is a great reference.
Other than not knowing what is allowable the other places I see business owners miss out on a lot of allowable deductions are:
- Not having a system for tracking expenses, especially cash expenses. Regular ongoing bookkeeping is a must. And yes I have a vested interest in stating that but whether you work with us or someone else you need to make this happen. If you are pulling out your shoe box at the end of the year I will guarantee you there are many receipts that never made it to the box and your memory having faded with time will not remember all you did.
- Comingling between your business and personal accounts. Having a tracking system that is updated at least on a monthly basis, is the only way you will truly keep track of everything. It is also the only hope you have in maintaining your asset protection.
- Home office deductions and business use of a vehicle are great deductions. Keeping track of all that happened throughout the year is what makes them powerful when it comes to keeping money in your pocket!
Remember when the April 15th deadline comes, even if you file an extension, you will be asked to pay the taxes you “think” you will owe. Knowing your numbers is what allows you to make an educated guess.
We are here to help, whether it’s getting your accounting in order or filing your return let our knowledgeable team help you to keep more of the money you are making!