When starting a new business, one of the most stressful tasks one can go through is the tracking and deducting of proper business expenses. Especially during tax time, you need to carefully balance claiming enough income and reducing your tax bill. It is essential that you hire an experienced accountant that can assist you along the way, making your life less stressful.
Proper business expenses can often include rent, cell phone bills, and materials. It is very important that you properly track and back up your expenses. Whether you choose to use QuickBooks or Excel, it is important to make sure all receipts are accessible along with bank statements in case you are audited. Proper paperwork can help reduce the time and cost of preparing your taxes.
Proper Business Expenses
There are many expenses that can be deducted when determining your net income from your business. Especially in the early stages, determining proper expenses can be one of the most anxious times. They can vary greatly among different professions and types of businesses, but some common expenses include rent, labor, taxes, supplies, and costs related to producing your good or services. Basically, any cost that helps you earn your revenue can be deducted.
Even if some of the expenses can be apportioned for personal use, you may still have a deduction (for example, your cell phone bill). Your tax professional should be able to put you on the right track.
Tracking Business Expenses
Along with determining which expenses to deduct, actually tracking these expenses can be very time-consuming and stressful, especially for new business owners. Most entrepreneurs would prefer to stick to doing what they know best. That is where a great system can take away much of the stress. Many small to medium-sized businesses often choose to use QuickBooks or Excel to track their expenses. Excel is great for smaller clients who have a minimal amount of transactions as it is simple to use.
QuickBooks is a more complex software that will allow you to reconcile bank and credit card transactions. Either way, it is important to be able to prove your valid business expenses with receipts and bank statements. Every year, the IRS decides to audit a small number of businesses, and documentation should make this process less painful for the taxpayer and their accountant. These can be held electronically or in paper form.
Determining and tracking proper business expenses can be the difference between having to dig into your savings to pay a large sum to the government, or simply closing your books for the year. Your method of tracking will depend on the size and needs of your business, but QuickBooks or Excel are powerful tools that can meet the needs of most small to medium-sized businesses.
Proper storage of receipts and bank statements can also make an audit much easier. Legitimate business expenses often include auto expenses, insurance, and any labor needed to produce your goods or services. When it comes down to it, discussing your option with your trusted accountant can make a stressful time much easier on your bottom line.