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IRA and 401(k) Contribution Limits for 2021 January 27, 2021

Posted by bradstreetblogger in : Business consulting, General, Retirement, Tax Planning Tips, Tax Rules, Tax Tip, Taxes , add a comment

Please find below the 2021 contribution ceilings for IRAs and 401(k) plans.  These ceilings and limitations for contributions to retirement plans are not to be taken lightly.  Penalties (excise taxes) for overfunding some retirement plans are absolutely shocking.  And, the penalties are incurred annually until the excess funds are removed. 
                                                                                                                                                                                               -Mark Bradstreet

Bad News on IRA and 401(k) Contribution Limits for 2021

Retirement savers will be disappointed with the contribution limits for next year, but at least more people will qualify for retirement tax breaks in 2021.

There’s good news and bad news from the IRS for Americans saving for retirement with IRAs, 401(k)s, and other retirement accounts in 2021.

Let’s start with the bad news: Contribution limits won’t go up next year.

And now the good news: The maximum income levels allowed to make deductible contributions to traditional IRAs, contribute to Roth IRAs, and claim the Saver’s Credit all increase for 2021.

Retirement Plan Contribution Limits for 2021

For 2021, employees who are saving for retirement through 401(k)s, 403(b)s, most 457 plans, and the federal government’s Thrift Savings Plan can contribute up to $19,500 to those plans during the year. That’s the same contribution limit in place for 2020.

Income Ranges for 2021

Increased income ranges for the traditional IRA deduction, Roth IRA contributions, and the Saver’s Credit means more Americans will qualify for these tax breaks.

If you’re contributing to a traditional IRA, the deduction allowed for your contribution is gradually phased-out if your income is above a certain amount. For 2021, the phase-out ranges are:

For people saving for retirement with a Roth IRA, the actual amount that you can contribute to the account is based on your income. To be eligible to contribute the maximum for 2021, your modified adjusted gross income must be less than $125,000 if single or $198,000 if married and filing jointly (up from $124,000 and $196,000, respectively, for 2020). Contributions begin to be phased out above those amounts, and you won’t be able to put any money into a Roth IRA in 2021 once your income reaches $140,000 if single or $208,000 if married and filing jointly ($139,000 and $206,000 for 2020). The phase-out range for a married person filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000 for 2021.T

Finally, the 2021 income limit for the Saver’s Credit for low- and moderate-income workers is $66,000 for married couples filing jointly ($65,000 in 2020), $49,500 for head-of-household filers ($48,750 in 2020), and $33,000 for singles and married people filing separately ($32,500 in 2020).

Credit given to: Rocky Mengle. Published on November 5, 2020.

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We also welcome and appreciate anyone who wishes to write a Tax Tip of the Week for our consideration. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.

This Week’s Author, Mark Bradstreet, CPA

–until next week.

What You Need to File your Taxes January 20, 2021

Posted by bradstreetblogger in : Business consulting, Deductions, Depreciation options, General, tax changes, Tax Planning Tips, Tax Preparation, Tax Rules, Tax Tip, Taxes , add a comment

Our job includes minimizing your income tax liability both in the short-term and long-term. Our ability to do so is closely tied to the accuracy and completeness of the information given us. Our client tax organizer and checklist are designed to help you report your income and deductions to us.  When your tax organizer and checklist are not completed, we may not know what we don’t know. Always, a good idea to call, mail, text or email any new events or questions during the year so we may either give you immediate suggestions and/or be on the alert during your tax preparation.

The following article by the Taxslayer Blog Team is written from the 30,000 feet view. Our tax organizer and checklist are more comprehensive. But the article will give you a starting point for gathering your tax information. 
                                                                                                                                                                                                -Mark Bradstreet

Tax Prep Checklist: Everything You Need to File Your Taxes

If you’d rather do something – anything – other than filing your taxes, remember that the sooner you file, the sooner you’ll get your refund. To make the e-filing process quicker, gather your forms and documents before you begin. Below is a checklist of the basic forms and records you’ll need to make slaying your taxes a cinch. 

Personal Information 

Income and Investment Information 

Self-Employment and Business Records (where applicable) 

Medical Expense Receipts and Records 

Charitable Donations 

Other Homeownership Info 

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We also welcome and appreciate anyone who wishes to write a Tax Tip of the Week for our consideration. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.

This Week’s Author, Mark Bradstreet, CPA

–until next week.

Business Planning for a Pandemic January 13, 2021

Posted by bradstreetblogger in : Business consulting, General, Tax Planning Tips, Tax Rules, Tax Tip, Taxes , add a comment

Not sure how to even begin this article. What I believe today I can practically guarantee you will change tomorrow. We have made some good decisions. We have made some bad decisions. We have also been overly reactive at times. But I suppose most of our decisions were sound based upon the information available at that moment. Turns out that a lot of that information was false or speculative. But who knew?

Many of our clients are prospering in this pandemic. Several clients are having a record year. A few clients through absolutely no fault of their own are suffering. A vaccine is on the horizon. I hope that that is a game changer. 

The following article is how some CFOs across the country are dealing with the pandemic. I hope it is of value.

            -Mark Bradstreet

Three experienced finance leaders share what they have learned and what they are doing to deal with turmoil and uncertainty.

The ongoing economic crisis caused by the coronavirus pandemic is forcing businesses to re-evaluate their spending, staffing, and structure. Company leaders are looking to their CFOs and management accountants to advise them on how to navigate the unique financial challenges they face as a result of the outbreak.

Three financial leaders with experience guiding companies through times of economic turmoil, including the 2008 recession, say there are specific ways CFOs and other leaders can handle the coronavirus crisis moving forward.

On matters from communications to cash flow, the experts offered advice about how to react quickly, stay calm, focus on what’s important, and be willing to let some things go. The advice is especially important for leaders experiencing their first financial disaster.

Save more cash

“Cash is king. … Never, ever in my career, and I’ve been doing this for 35 years, has that statement been more true than right now,” said Brenda Morris CPA (inactive), CGMA, who lives in the Seattle area and is a partner with CSuite Financial Partners based in Manhattan Beach, Calif. She is on the Association’s Americas Regional Advisory Panel, and also serves as a consultant and coach for several public and private businesses, including Boot Barn and Duluth Trading Company.

Morris works with Fortune 500 and Fortune 1000 companies, some of which “have a lot of cash on the balance sheet”, she said, but fixed costs such as payroll and building rent and mortgages can add up quickly, eating into those reserves.

“It’s pretty amazing how fast companies can burn through what seemed to be a very adequate balance sheet,” she said.

Morris advises companies to create a robust cash sensitivity model and run as many scenarios as possible to see how much money would be needed in a crisis. Some of the models might include the financial impacts of furloughing employees, figuring out ways to quickly drive up sales, getting more aggressive in negotiations, or finding more investors.

“You step it up and figure it out,” Morris said. “React quickly. Don’t languish too long in making some of the hard decisions. Those are the [companies] that’ll make it through.”

Bob Sannerud, CPA, CGMA, the CFO of the air medical company Life Link III, and chair of the Association’s Americas Regional Advisory Panel, knows the stress of not having enough cash on hand. He joined Life Link III during the 2008 financial crisis and found the business “in dire straits.”

“We had four days of cash when I came on board and came in to turn around the company,” he said.

Since then, he has done some financial engineering to correct the company’s cash flow, working with leaders of various departments to discuss business challenges and priorities. Today, the company is stronger financially and will likely survive the uncertainty of the coronavirus outbreak, Sannerud said.

“If it goes on for a year, well, all bets are off. But in the short term, we feel we can handle it,” he said.

Create a disaster recovery plan

Companies should create disaster recovery plans and select a task force of leaders to discuss the what-ifs, Morris said. If possible, they should test out their plans, but “it’s rare for companies to actually do exercises or dry runs. [Some] companies don’t have the bandwidth to run catastrophic scenarios as exercises and just sort of see what happens,” she said. “That’s an investment.”

Her work with various businesses and boards has allowed her to see how different companies are responding to the coronavirus crisis. That insight has convinced her how important it is for companies to have a team of people investigating what is working and what isn’t before, during, and after an economic crisis.

She is leading a coronavirus crisis response team for one of the boards she sits on and said her goal is to limit distractions for company leaders so they can focus on the priority areas of the business.

Having a disaster plan is essential in the broadcast company says Ralph Bender, CPA, CGMA, who serves as CFO.

“We’ve been through floods, hurricanes, [and] now this,” he said, noting the financial and logistical challenges the media industry is facing during the coronavirus outbreak. Bender is the CFO of Manship Media, a family-owned broadcasting group that runs TV stations in Baton Rouge, La., and the Rio Grande Valley in Texas.

“Things are going to be dire. … But most people will find ways to get through this,” Bender said. “It’s important to have a disaster recovery plan … to not just have something on paper, but to have tried things out.”

Build trust

Life Link III transports more than 2,000 patients a year by helicopter and airplane ambulance in Minnesota and Wisconsin.

Some of the company’s first responders have been on the front lines of the coronavirus pandemic, leading them to ask questions about their own personal safety when dealing with sick patients, what protective gear they will have access to, and whether their jobs are in jeopardy, according to Sannerud.

The company saw a decreased flight volume in March, partly due to weather but mostly due to the coronavirus outbreak, he said, but there are no plans to let go of staff or close any of the eight bases where they are located.

“For us, the challenge has been really making sure our people are being taken care of and making sure that they’re assured that we’ve got their best interests in mind as we go forward,” Sannerud said.

Providing employees, stakeholders, and customers with timely, transparent communication is vital during tumultuous times like these, Sannerud said. Companies need to establish a central communications hub and make sure the various leaders are speaking with one voice.

“It helps build the trust, because we are able to clearly state what we know, what we don’t know, and what we’re doing,” Sannerud said, noting that communication shouldn’t be too negative or overly optimistic.

Life Link III leaders decided to reach out to employees’ family members as well to assure them that the company cares and to acknowledge the stress they are under. That kind of personal touch can help build credibility and calm any fears spouses or other family members might have, Sannerud said.

Be prepared to pivot, but don’t panic

When Bender and his company, Manship Media, first realized how big the coronavirus outbreak might be, they quickly pivoted to a new plan to prepare for the possibility that staff might need to work from home.

Using some of the company’s cash reserves, they bought 30 Google Chromebooks for employees to take home. The decision paid off as businesses across the country, including news media, moved to more remote work in an effort to stop the coronavirus from spreading.

“It was under a $7,500 investment, and look at the rewards,” Bender said. “People are working. But more importantly, people are working safely.”

CFOs and other financial leaders need to think of themselves as chief strategists and not just tell company leaders not to spend any money during a crisis, according to Bender.

“Be calm and do not panic,” he said. “You calmly look into details. What’s essential? What’s not?”

Sannerud agreed and said it’s crucial that financial leaders “be prepared to pivot.”

“Just because you made a plan yesterday doesn’t mean it’s going to hold water today,” he said. “Be adaptable, and be willing to make a change based on information.”

The best way to get that information is to talk with employees on the front lines of the work, Sannerud said. Take time to ask them what they are seeing and experiencing and use that information to guide your business plans during times of VUCA (volatility, uncertainty, complexity and ambiguity), according to Sannerud.

Focus on what’s important and what you can control, and forget the rest

Sannerud is used to forecasting long-term operations for Life Link III, but the coronavirus pandemic has made budgeting nearly impossible with the uncertainty his business and others are facing.

“I can’t forecast operations out much more than the next three months, and even that’s not exactly crystal-clear,” he said.

Instead, Sannerud has tried to focus on the limited things he can control, such as providing calm and steady leadership during a crisis, being transparent with employees about the state of the business, and keeping a set routine even while working from home.

He is usually in the office by 6 a.m., so he decided to keep the same hours while working from home. When he is finished with work, he makes sure to exercise, usually by biking or taking a walk with his wife. He also tries to find humor in each day, limit the amount of media he consumes, and focus on his mental and physical health.

“Those are all things you can control,” he said.

Morris’s biggest piece of advice for financial leaders is to determine what’s most important to your business and not get distracted by outside noise. Ask yourself: What is the biggest and most impactful issue facing the company?

“Have a course of action that keeps you focused each day,” she said.

Bender suggested focusing on what your company does well and where it can have the most success. For his company, that meant letting go of a newspaper and radio stations it owned several years ago and focusing on its two TV stations. Downsizing the company caused it to be more profitable and workable, he said.

Now, as he and his company navigate the coronavirus pandemic, they are again looking at what their focus should be to get through this crisis. This time, it has less to do with the bottom line.

“As CPAs, we hate to say, ‘Who cares about the bottom line?’ But right now, that’s not the most important thing to us,” Bender said. “There’s an opportunity for companies to show their employees that their values are not just about a bottom line, but they’re about welfare of employees, stockholders, and customers.”

Bender said he understands some CFOs and leaders don’t have the same financial advantages as his company. To them, he has this message: “Stay focused. Stay safe. For God’s sake, keep a sense of humor. This has all of us on edge.”

Credit given to: Kelly Hinchcliffe is a freelance writer based in North Carolina. Published on June 15, 2020.

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We also welcome and appreciate anyone who wishes to write a Tax Tip of the Week for our consideration. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.

This Week’s Author, Mark Bradstreet, CPA

–until next week.

A Checklist of Business Deductions January 6, 2021

Posted by bradstreetblogger in : Business consulting, Deductions, Depreciation options, General, Section 168, Section 179, tax changes, Tax Planning Tips, Tax Preparation, Tax Rules, Tax Tip, Taxes, Taxes , add a comment

Sara Sugar has created a list of small business deductions as shown below.  It is a great list to scan through and see if you have been overlooking any tax deductions.  Always fine to call us with any questions or comments you may have.

                                 -Mark Bradstreet

THE ULTIMATE LIST OF SMALL BUSINESS TAX DEDUCTIONS

Every small business owner wants to save money — and small business tax deductions are one way to do exactly that.

This list of 37 deductions will take you from “Ugh, taxes” to “Taxes? I got this.”

1. Vehicle Expenses.
Keep records during the year to prove the use of your car, truck or van, for business, especially if you also use the vehicle for personal reasons. When it’s time to pay taxes, you can choose to deduct your actual expenses (including gasoline, maintenance, parking, and tolls), or you can take the more straightforward route of using the IRS standard mileage rate — 58 cents per mile in 2019.

Whether you’re running errands in your own car or making deliveries in your bakery van, track the mileage and run some numbers to see which method gives you the higher deduction. If you drive a lot of miles each year, it makes more sense to use the standard mileage deduction when filing taxes. However, if you have an older vehicle that regularly needs maintenance, or isn’t fuel efficient, you might be able to get a larger deduction by using your actual expenses vs. the IRS mileage rate.

Either way, we all know that gas, repairs, parking, and mileage add up, so taking advantage of the standard mileage rate, or deducting your actual expenses, is a no-brainer way to put some of that money back in your pocket. Just make sure you keep records diligently to avoid mixing personal expenses with business ones.

2. Home Office.
Do you run part of your small business out of your home, maybe doing the books in the evenings after you’ve parked your food truck for the night? Or perhaps you run an entirely home-based business. For many self-employed individuals and sole proprietors, it’s pretty standard to have a space at home that’s devoted to your work. The key here is the word devoted. Sometimes doing work on at the kitchen table while your kids do their homework doesn’t count as a home office. You must have a specific room that’s dedicated to being your office in order for it to be tax deductible.

Calculating the size of your deduction is primarily related to the amount of your home that’s used as an office. For example:

Total square footage of your home / divided into square footage used as an office = the percentage of direct and indirect expenses (rent, utilities, insurance, repairs, etc.) that can be deducted.

We highly recommend that you read the IRS’ literature on this particular tax deduction, and/or speak with a tax professional before filing taxes with this deduction. It’s one of the more complicated ones available to small business owners, and there have been numerous court cases and controversies over the years. When dealing with the potential for a costly audit, it pays to be safe by consulting a professional tax preparer rather than sorry.

3. Bonus Depreciation.
If you buy new capital equipment, such as a new oven for your pizzeria, you get a depreciation tax break that lets you deduct 100 percent of your costs upon purchase. Under the Tax Cuts and Jobs Act, 100% bonus depreciation only pertains to equipment purchased and placed in use between September 27, 2017 and January 1, 2023 — something to keep in mind as you plan for new equipment purchases in the next few years.

It’s important to note that according to the IRS, the asset you purchase must meet the following three requirements:

A few things that don’t count as assets include:

4. Professional Services.
As a small business, you don’t have in-house accountants or attorneys, but that doesn’t mean you can’t deduct their services. If you hire a consultant to help you grow your gift shop’s outreach, the fees and overall expense you pay for those services are deductible. Make sure the fees you’re paying are reasonable and necessary for the deduction to count by checking with the appropriate IRS publication or a tax professional. But you’d do that anyway, wouldn’t you?

5. Salaries and Wages.
If you’re a sole proprietor or your company is an LLC, you may not be able to deduct draws and income that you take from your business. However, salaries and wages that you pay to those faithful part-time and full-time employees behind the cash register are indeed deductible.

However, this doesn’t just stop at standard salaries and wages. Other payments like bonuses, meals, lodging, per diem, allowances, and some employer-paid taxes are also deductible. You can even deduct the cost of payroll software and systems in many cases.

6. Work Opportunity Tax Credit.
Have you hired military veterans or other long-term unemployed people to work behind your counter? If so, you may be eligible to take advantage of the Work Opportunity Tax Credit of 40 percent of your first $6,000 in wages.

7. Office Supplies and Expenses.
If you’re running a frozen yogurt shop, when you hear the word “supplies,” you probably think of plastic spoons. However, even if your business doesn’t have a traditional office, you can still deduct conventional business supplies and office expenses, as long as they are used within the year they’re purchased, so set up a file for your receipts. Many times, you can also deduct the cost of postage, shipping, and delivery services so if mail-order is a part of your business, be sure to keep track of this cost.

8. Client and Employee Entertainment.
Yes, you can take small business deductions for schmoozing your clients, as long as you do indeed discuss business with them, and as long as the entertainment occurs in a business setting and for business purposes. In some cases, you can’t deduct the full amount of your entertainment expenses, but every bit helps.

Here are some tips to guide when and what you can deduct:

(Please note:  the TCJA affected Meals & Entertainment deductions beginning in 2018.)

9. Freelance/Independent Contractor Labor.
If you bring in independent contractors to keep your checkout lines moving during the holidays or to create new marketing materials for your shop, you can deduct your costs. Make sure you issue Form 1099-NEC to anyone who earned $600 or more from you during the tax year.

10. Furniture and Equipment.
Did you buy new chairs for your eat-in bakery or new juicing blenders for your juice bar this year? You have a choice regarding how you take your small business tax deduction for furniture and equipment. You can either deduct the entire cost for the tax year in which it was purchased, or you can depreciate the purchases over a seven-year period. The IRS has specific regulations that govern your choices here, so make sure you’re following the rules and make the right choice between depreciation and full deduction.

11. Employee Benefits.
The benefits that businesses like yours offer to employees do more than attract high-quality talent to your team. They also have tax benefits. Keep track of all contributions you make to your employees’ health plans, life insurance, pensions, profit-sharing, education reimbursement programs, and more. They’re all tax-deductible.

12. Computer Software.
You can now deduct the full cost of business software as a small business tax deduction, rather than depreciating it as in years past. This includes your POS software and all software you use to run your business.

13. Rent on Your Business Location.
You undoubtedly pay rent for your pet store or candy shop. Make sure you deduct it.

14. Startup Expenses.
If you’ve just opened your gift shop or convenience store, you may be able to deduct up to $5,000 in start-up costs and expenses that you incurred before you opened your doors for business. These can include marketing and advertising costs, travel, and employee pay for training.

15. Utilities.
Don’t miss the small business tax deductions for your electricity, mobile phone, and other utilities. If you use the home office deduction, your landline must be dedicated to your business to be deductible.

16. Travel Expenses.
Most industries offer some form of trade show or professional event where similar businesses can gather to discuss trends, meet with vendors, sell goods and discuss industry news. If you’re traveling to a trade show, you can take a small business deduction for all your expenses, including airfare, hotels, meals on the road, automobile expenses – whether you use the IRS standard mileage rate or actual expenses – and even tipping your cab driver.

There are also deductions for expenses that might not immediately come to mind, like:

In order for your trip to qualify for a travel deduction, it must meet the following criteria:

As with all deductions, it’s imperative that you keep receipts and records of all business travel expenses you plan to deduct in case of an audit.

17. Taxes.
Deducting taxes is a little tricky because the small business deduction depends on the type of tax. Deduct all licenses and fees, as well as taxes on any real estate your business owns. You should also deduct all sales taxes that you have collected from the customers at your deli. You can also deduct your share of the FICA, FUTA, and state unemployment taxes that you pay on behalf of your employees.

18. Commissions.
If you have salespeople working on commission, those payments are tax-deductible. You can also take a small business tax deduction for third-party commissions, such as those you might pay in an affiliate marketing set-up.

19. Machinery and Equipment Rental.
Sometimes renting equipment for your coffee shop or concession stand is beneficial to your bottom line, since you can deduct these business expenses in the year they occur with no depreciation.

20. Interest on Loans.
If you take out a business line of credit, the interest you pay is completely deductible as a small business tax deduction. If you take out a personal loan and funnel some of the proceeds into your business, however, the tax application becomes somewhat more complicated.

21. Inventory for Service-Based Businesses.
Inventory normally isn’t deductible. However, if you’re a service-based business and you use the cash method of accounting (instead of the standard accrual method typically used for businesses with inventory), you can treat some inventory as supplies and deduct them. For instance, if you’re an ice cream shop but you sell your special hot fudge sauce as a product, your inventory may be deductible. Consult a tax professional to see if you qualify.

22. Bad Debts.
Did you advance money to an employee or vendor, and then not receive repayment or the goods or services you thought you were contracting for? If so, you may be able to treat this bad business debt as a small business deduction.

23. Employee Education and Child Care Assistance.
If you go above and beyond with your employee benefits, you may be able to take small business tax deductions for education assistance and dependent care assistance. The IRS is pretty much rewarding you here for being a great employer. So, take a bow, and the deduction.

24. Mortgage Interest.
If your business owns its own building, even if it’s just a hot dog stand, you can deduct all your mortgage interest.

25. Bank Charges.
Don’t forget to deduct the fees your bank charges you for your business accounts. Even any ATM fees are deductible.

26. Disaster and Theft Losses.
If your business is unfortunate enough to suffer theft or to be the victim of a natural disaster during the year, you may be able to turn any losses that your insurance company didn’t reimburse into a small business tax deduction.

27. Carryovers From Previous Years.
Some small business tax deductions carry over from year to year. For instance, if you had a capital loss in a previous year, you may be able to take it in the current year. Specifics often change from year to year, so make sure you’re up to date on the latest IRS regulations.

28. Insurance.
The insurance premiums you pay for coverage on your business is all tax-deductible. To qualify, your insurance must provide coverage that is “ordinary and necessary.”

This could include coverage for:

There are a few insurance types that you can’t deduct, the most common being life insurance. If you’re not sure whether you can deduct a certain type of insurance, and that deduction is an important factor in your decision, please speak with a tax professional first and save yourself any unnecessary expenses.

29. Home Renovations and Insurance.
Did you take a deduction for a home office already? If so, business expenses related to any renovations to that part of your home are also deductible, and so is the percentage of your homeowner’s insurance that covers that part of your home. Remember, all small business deductions related to home offices only apply if you use part of your home exclusively for business.

30. Tools.
The IRS distinguishes between tools and equipment. While you may have to capitalize on equipment rather than deducting it in one year, you can deduct tools that aren’t expensive or that have a life of only a year or less. And for the IRS, “tools” doesn’t just refer to hammers or screwdrivers; your spatulas and cookie sheets are tools as well.

31. Unpaid Goods.
If your business produces goods rather than providing a service, you can deduct the cost of any goods that you haven’t been paid for yet.

32. Education.
Did you attend any seminars, workshops or classes in the past year that were designed to help you improve your job skills? Your work-related educational expenses may be deductible, especially if they’re required to keep up or renew a professional license. Remember, they have to be work-related. If you own a bar or cafe, you won’t be able to deduct skiing lessons.

33. Advertising and Marketing.
You already know that providing amazing goods and services isn’t enough to make your business succeed. You also need to advertise so your potential customers can find you. Advertising and marketing dollars can add up fast, but fortunately, they are all tax-deductible.

This is great news since advertising and marketing are often of the biggest business expenses that small businesses need to deal with as they get off the ground. Rest assured, you can deduct everything from flyers to billboards to business cards, and even a new website. Political advertising is the biggest exception to this rule. Those expenses are not deductible.

34. Charitable Deductions.
Yes, your small business can donate to charity and take a deduction for it. It can donate supplies, money, or property to a recognized charity, but pay attention to the rules before you go crazy giving stuff away. Donations of your time don’t count, and you can’t wipe out your business income with donations. Also, check with the IRS before you make a charitable deduction to make sure the organization you want to support qualifies for the deduction.

35. Cleaning and Janitorial Expenses.
You know all too well that the workday isn’t over when you flip the sign on the door to say “Closed.” If you hire any type of cleaning service, make sure you take your small business tax deduction.

36. Moving Expenses.
Did you need to move to start your business? If you’re a sole proprietor or self-employed worker and you had to move more than 50 miles for business, you may be able to deduct some of your moving expenses from your taxes. Specifically, you may be able to deduct packing and transportation costs, utility and service connection fees, and travel costs. However, you can’t deduct the cost of any meals or security deposits you’ve had to pay.

Lastly, to qualify for these deductions, you will need to remain a full-time employee of the business that required you to move for at least 78 weeks out of the following two years.

37. Intangibles like Licenses, Trademarks, and other Intellectual Property.
Most of the time, expenses related to the registering or protection of intellectual property are deductible. However, the process you go about it can differ depending on what you’re trying to deduct. Some costs must be depreciated over multiple years, while others can be fully deducted within the year in which they were incurred. For example, licensing fees are typically considered capital expenses that must be depreciated. However, trademarks can often be deducted in the same tax year. If you’re uncertain, we recommend working with a tax professional to ensure you’re in compliance with the regulations governing your specific situation.

No matter what type of small business entity you have, you have to pay quarterly estimated taxes if the business owes income taxes of $1,000 or more. Corporations only have to pay quarterly estimated taxes if they expect to owe $500 or more in tax for the year.

Before you owned a business, filing taxes was a one-time thing. But as a small business owner, you’ll have to pay the IRS four times per year. On one hand, that’s four more tax deadlines you might miss. But on the bright side, by the time your yearly tax deadline comes around, you’ll have already paid three-quarters of your tax return.

To make things even more complicated, businesses must deposit federal income tax withheld from employees, federal unemployment taxes, and both the employer and employee social security and Medicare taxes. Depositing can be on a semi-weekly or monthly schedule.

Whether you’re filing your taxes quarterly or holding off for the next annual deadline, you should begin preparing for your taxes by keeping records of your expenses as of January of each year. Make sure to document each of these small business tax deductions by keeping physical receipts and writing down the business reason for the expense on your receipts as soon as you receive it.

With this comprehensive list of small business tax deductions, you’ll be well on your way to saving on your taxes this year. However, deductions can be tricky, it’s always best to consult a tax expert for any questions that might arise to ensure you are complying with all regulation and avoid any penalties.

Credit given to Sara Sugar. Published in MONEY & PROFITS on Jan 21, 2020.  

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We also welcome and appreciate anyone who wishes to write a Tax Tip of the Week for our consideration. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.

This Week’s Author, Mark Bradstreet, CPA

–until next week.