As the tax filing season approaches, many new and small business owners find themselves scrambling to organize their finances and uncover all possible deductions. Preparing early is key to maximizing tax deductions and reducing your taxable income. This guide provides practical steps to help you make the most of your deductions and avoid costly mistakes.
Why Preparation Before Filing Season Matters
The closer you get to filing deadlines, the more stressful and error-prone tax preparation can become. Starting early gives you the time to:
Gather all necessary documentation.
Identify overlooked deductions.
Correct any bookkeeping errors.
Proactive preparation ensures your business can take full advantage of deductions, reducing your tax liability and freeing up funds for growth.
Common Tax Deductions for Business Owners
Here are some key deductions to focus on as you prepare:
Mileage and Vehicle Expenses
If you use your vehicle for business purposes, you may be able to deduct related expenses. The IRS offers two methods for calculating this deduction:
Standard Mileage Rate: Track the miles driven for business purposes and multiply by the IRS rate (67 cents/mile for all of 2024).
Actual Expenses: Deduct costs such as gas, maintenance, and insurance based on the percentage of business use.
Tip: Keep a mileage log or use an app to accurately track your trips. (For example, apps like “Mileage Tracker by Driversnote”.)
Office Expenses
Home Office Deduction: If you work from home, you may be able to deduct a portion of your rent or mortgage, utilities, and internet expenses. Ensure the space is used exclusively for business purposes.
Supplies: Pens, paper, software, and other items necessary for operations can be deducted.
Marketing and Advertising
Expenses related to promoting your business, such as social media ads, website hosting, and printed materials, are fully deductible.
Professional Services
Fees paid to accountants, lawyers, or other consultants for business-related services are deductible.
Employee-Related Costs
Salaries, wages, and benefits.
Payroll taxes.
Education or training programs for employees.
Checklist: Preparing for Tax Filing
To maximize tax deductions, follow this checklist before filing season begins:
1. Organize Financial Records:
Income statements.
Receipts for deductible expenses.
Bank and credit card statements.
2. Review Last Year’s Tax Return:
Identify missed opportunities or deductions from previous filings.
3. Track All Expenses:
Use accounting software such as QuickBooks Online to categorize expenses.
Ensure every expense has proper documentation (this is a requirement by the IRS, not a suggestion!). Again, one helpful app you can use for this is Driversnote.
4. Calculate Mileage:
Use a mileage tracker or calculate manually based on your records.
5. Consult a Professional:
Trusted advisors like Overman Bookkeeping can ensure compliance and help identify overlooked deductions.
Resources for Further Reading
Start Maximizing Your Deductions Today
Don’t wait until the last minute to get your finances in order. Overman Bookkeeping, PC offers services tailored to you and your business’s needs, helping you stay organized and prepared for filing season. Contact us at Overman Bookkeeping for expert guidance and support.
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