What Is A Tax Write-Off? 5 Most Common Write-Offs For Small Businesses

Understanding the ins and outs of tax write-offs is a massive advantage for every business owner. It helps you determine the correct amount of tax owed, and more importantly, what to write off to avoid paying any unnecessary extra money. 

This article will cover what a tax write-off is and the 5 most common tax write-offs that might benefit your business. 

Read on! 

What is a tax write-off? 

A write-off (or a tax reduction) is an expense that you can deduct from total revenue to determine the taxable income for your small business. Essentially, tax write-offs lower your taxable income, which means you will pay less tax. That’s why small business owners always try to write off as many expenses as possible.

However, write-offs must be necessary to a business’s operation and be common in the applicable industry to be qualified, according to the IRS. For example, a tax advisor can write off their business cell phone bill because taking calls helps the business operate smoothly, and it’s a common practice in the tax consulting industry. So, the cell phone expense is qualified to be deducted. 

How do small businesses write off? 

Every business, except for partnerships, needs to file an annual income tax return which will include your business write-offs. All you need to do is visit the IRS website and get the correct income tax form for your business structure. You then fill your tax write-offs in and submit the form! 

It’s also crucial to document your business spending, big or small. Your bookkeeping entries aren’t sufficient. You must keep all receipts and purchase records, whether physical or digital. This will help you stay ready if the IRS knocks at your door. 

If your piles of receipts constantly give you a headache, try Shoeboxed! Shoeboxed is a receipt scanner app that digitizes and extracts important information from your paper receipts automatically in seconds. Every single receipt will be stored and fully searchable in one secure place. Sign up for Shoeboxed to enjoy the paperless world! 

Top 5 common tax write-offs for small businesses 

The good news is most business expenses are either fully or partially deductible. Below, you’ll find a list of the top 5 write-offs commonly available that a small business owner should be aware of for the tax season.

  1. Advertising and promotion expenses

You can fully subtract the cost of advertising and promotion from your taxable income. It can be anything like:

  • Ad fees on Google or social media like Facebook, Instagram, etc.  
  • Printing costs for business cards, brochures, and flyers
  • Payment for designers to make logos, posters, etc. 
  • Software used for marketing purposes
  • Website expenses

Remember though, any expenses spent to influence legislation like lobbying or to sponsor a political campaign can’t be deducted. 

  1. Car and truck expenses 

If you use your vehicle for both business and personal reasons, you can deduct all the business-related expenses from using it.  

There are two ways to calculate your automobile expenses. You can choose whatever option gives you the most tax savings. 

  • Standard mileage rate: With this method, you just need to multiply the number of miles traveled for business by the standard rate, which is now $0.56 per mile. 
  • Actual expense method: This method entails adding up all of your vehicle’s operational costs such as gas, repairs, oil, tires, registration fees, leasing payments, and insurance charges. Multiply them by the percentage of miles you drive for business

Keep in mind that you can’t deduct the miles driven while commuting to work because they are regarded as personal commuting expenses. 

  1. Travel expenses 

A business trip eligible for traveling tax deduction has to be ordinary, necessary, and away from the entire city or area where you operate your business, regardless of where you live (aka tax home). Plus, your travel must be longer than a normal day’s work, requiring you to sleep or rest during the trip. 

The IRS approves some deductible expenses for business travel, including:

  • Travel costs to and from your destination by plane, train, bus, or car
  • Baggage and shipping 
  • Parking and toll fees
  • Cost of transportation during the business trip
  • Accommodation 
  • Dry cleaning and laundry
  • Tips
  • Meals 
  • Other similar ordinary and necessary expenses related to your business travel. (e.g., a rental fee of a hotel business center, hiring an interpreter, etc.)

Again, remember to ask for and keep all the receipts and related documents as they are the foundation for writing expenses off. 

  1. Bank fees

You may be able to deduct annual or monthly service charges, transfer fees, or overdraft fees from your bank or credit card. Also, you may be eligible to deduct transaction and merchant costs paid to third-party payment processors. For example, platforms like Stripe and PayPal fall within this category. 

Keep in mind that any fees directly tied to your personal credit cards or bank accounts aren’t deductible. That’s why it’s best to separate your business bank account from your personal one, as it’s easy to mix things up when you file a tax return and you might end up losing money. 

  1. Education costs

You can fully write off education expenses if they contribute value to your business and advance your expertise. The IRS will look into your classes or courses to decide whether they maintain or improve skills that are compulsory in your current business. If yes, they can be written off completely. 

Below are some examples of education costs: 

  • Courses to improve skills in your field
  • Seminars and webinars
  • Subscriptions to trade or professional publications in your field
  • Books 
  • Workshops 
  • Transportation expenses to and from classes

Any education costs that don’t serve your current career and business wouldn’t be qualified. 

In short, maximize your write-offs 

No one wants to pay Uncle Sam more than necessary. That’s why you really should understand tax write-offs and minimize the amount of income tax you have to pay. Don’t forget to keep good records of every transaction in case the IRS wants to audit you!. 

Get your receipts organized with Shoeboxed

Shoeboxed guarantees that all of your receipts are legibly scanned and accepted by both the Internal Revenue Service and the Canada Revenue Service. Categorized and easy to locate, Shoeboxed is your escape from the stacks of paper documents.

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Balance Sheet Explained – A Basic Guide

A balance sheet is one of the three most important financial statements. It provides a crucial insight into how your business is doing financially at a given point in time. This article will take a deep dive into the ins and outs of balance sheets.

Related articles:

Balance sheet explained 

Simply put, a balance sheet displays a business’s assets, liabilities, and owner’s equity at any given point in time. A balance sheet provides an overview of what your business owns, what it owes, and the amount invested by its owners. In other words, it summarizes your business’s worth, so you can better understand its financial position. A balance sheet is also known as a statement of financial position. 

Key components of a balance sheet 

A balance sheet has three main parts: assets, liabilities, and shareholder’s equity. In each part, relevant items are listed and they must match the accounts outlined on your chart of accounts. 

Let’s take a closer look at the three components of a balance sheet:

  1. Assets 

The assets section lists everything your business owns that provides economic benefits. The sub-items are arranged in order of liquidity, or how easily they can be converted to cash. 

The assets section is divided into the two following categories: 

Current Assets: Assets that can be turned into cash within one year. Here are some current assets that companies commonly own:

  • Money in a checking and/or savings account
  • Cash equivalents (currency, stocks, and bonds)
  • Accounts receivable (money customers owe when buying products/services on credit)
  • Short-term investments
  • Prepaid expenses
  • Inventory

Non-Current Assets (Long-Term Assets): assets that will take more than one year to be converted to cash. Some examples of non-current assets are:

  • Land and property 
  • Machinery and equipment 
  • Intellectual assets (copyrights, patents, trademarks, etc.)
  • Goodwill (value from brand name, customer base, reputation, etc.)
  • Long-term investments 
  1. Liabilities 

Following the assets section are liabilities. Your liabilities are everything that you owe to others. Similar to assets, liabilities are also broken down into current and long-term liabilities.

Current liabilities are debts due within a year. Items are listed in order of their due date. Here are some examples:

  • Rent 
  • Utilities
  • Taxes
  • Short-term loans
  • Accounts payable (money owed when buying goods on credit) 
  • Interest payments

Long-term liabilities have due dates longer than one year. For example:

  • Long-term loans
  • Deferred income taxes
  • Pension fund liabilities.
  1. Equity 

Equity is the last section in a balance sheet. It refers to the money owned by the business owners or shareholders. In other words, equity is your net assets. The most common items belonging to this section are:

  • Capital (money put into the business by the owners)
  • Private or public stock
  • Retained earnings (net earnings to reinvest or pay off debts)

The balance sheet golden rule 

A balance sheet must follow a golden rule or an accounting formula as follows:

Assets = Liabilities + Equity

What your business owns always has to be balanced with what it owes plus its equity. This is because your assets either come from your borrowings or your own money. 

What does a balance sheet look like?

Normally, a balance sheet will be divided into two columns: assets on one side and liabilities plus equity on the other. However, it’s not unusual to see a balance sheet looking like a long, endless list. You decide the format most suitable to your business! 

Source: FundNet 
Source: Accounting Guide 

Why is a balance sheet important? 

A balance sheet is an important financial document as it allows you to look at your business’s position in detail. When comparing the current balance sheet to ones in the past, you can analyze and understand your business operations better. Think of it as a regular health check for your company. The balance sheet allows you to make better decisions by giving you an insight into what your business is doing well and what it’s not.

Here are a few financial areas that can be improved by leveraging a balance sheet:

Liquidity 

It’s always challenging for any business to calculate how much cash they have readily available. With the figures on a balance sheet, businesses can work out and analyze critical financial metrics like the current ratio (current assets ÷ current liabilities) or quick ratio ((current assets – inventory) ÷ current liabilities). Interpreting these ratios correctly will help you find the best ways to manage your company’s liquidity.    

Efficiency 

You can determine how efficiently your company uses its assets by comparing your balance sheet with other financial statements. Through calculations and analysis, you’ll be able to determine which areas in the business are generating profits. Then, you can make better plans for future investments or capital allocation.  

Risks

Your balance sheet summarizes how much debt you owe, which can tell you how much financial risk you face. Being aware of your debt situation allows you to make wiser business decisions and avoid potentially damaging events that could lead to bankruptcy. 

Who prepares the balance sheet?

Depending on your business’ size and model, the balance sheet may be prepared by different people. For example, in a small privately-owned business, a bookkeeper will prepare the balance sheet. For a mid-size private firm, their accountants may prepare it first, then have it reviewed by an external accountant. 

Key takeaways 

The balance sheet is an important financial document that you can’t overlook. Understanding what it is, how it works, and how it correlates to the rest of your business are a great advantage for any business owner. 

What’s Shoeboxed?

Shoeboxed is an application that lets you digitize every paper receipt in just a few seconds. Shoeboxed also automatically extracts and categorizes important data from your receipts with human verification

Quick, reliable, and trustworthy, Shoeboxed promises to organize your piles of documents in the best way possible! 
Go paperless for free with Shoeboxed!

Expensify vs Shoeboxed: Which One Is for You?

Whether you’re self-employed or a business owner, choosing the perfect accounting software for your business is very important. There are countless software and apps on the market with various features, pricing, details, and so much more to check. We understand that not all people have time to test dozens of solutions. That’s why we came up with a complete comparison between the top choices for receipt tracking and expense management software: Expensify vs Shoeboxed

An overview: Expensify vs Shoeboxed

1. Cross-platform compatibility

Different people have different needs. Some love iOS, while others are loyal to Android. And there are Windows users, and there are people who like to access things on a browser. This situation is especially true when working as part of a team.

Both Shoeboxed and Expensify are available on Android and iOS platforms. You can also use them in any browser of your choice without any issues. This will help you keep your receipts in sync at all times.

2. Interface

Since most of us use smartphones to scan receipts, the app’s interface is an important part to consider when choosing the right accounting app. Both apps are easy to use with the basic functions displayed right on the portal. The interface is clean and intuitive with a focus on simplicity and speed.

A comparison between Expensify vs Shoeboxed’s interface

3. Main features

The basic functionality remains the same. You scan an expense receipt, and the app will extract the key data such as items, quantity, price. They will also categorize them by vendor, the total amount, date, and payment type. There are various categories to further classify your expenses like Mileage, Groceries, Entertainment, Office Supplies, etc. Then, the apps create a digitized version of the receipt synced with your cloud account. 

Both apps allow you to arrange receipts by trips, create a report, and submit it for approval. Users can also track mileage for business trips with both apps. Additionally, Expensify offers a per diem functionality where an individual is given a daily allowance, and you can use the app to keep track of it on a daily basis.

On the other hand, Shoeboxed has one feature that Expensify lacks. If you have a bunch of receipts and no time to scan them, you can mail them straight to Shoeboxed‘s processing facility for free with our postage-paid Magic Envelope™. Shoeboxed will scan the receipts, turn them into organized and actionable digital data, and upload them to your account. 

This mail-in feature that Shoeboxed offers helps you clear your desk and drawers and bring you up to speed. This unique service is extremely useful for small business owners or freelancers—those who have to handle a lot of work on their own. By doing this, you can free yourself from the paperwork and focus on improving your business’s core value. 


What’s more, Shoeboxed ensures that all your digital receipts are human-verified and audit-ready. You can rest assured that your receipts are legibly scanned, clearly categorized, and accepted by both the Internal Revenue Service and the Canada Revenue Service in the event of an audit. This is the best choice for freelancers and business owners when it comes to tax season. 

4. Third-party integration

Both Shoeboxed and Expensify integrate with various third-party apps and software such as Quickbooks, Intuit, and Xero. Expensify also connects with Microsoft, Oracle, SAP, Bill.com, Uber, and several other popular services. 

5. Pricing

Pricing is definitely an important factor to consider, especially if you’re looking for a scalable solution.

Shoeboxed offers three primary plans. The Startup plan (for individuals and freelancers) begins at $18/month, allowing you to scan and store up to 900 documents (both physical and digital) per year. If you are a professional or small business owner, go for the Professional plan. With $36 for two users, this plan offers you 3600 documents/month. If you own a business with high volume, the Business plan at $54/month with 7200 documents/month is the most suitable option.

On the other hand, Expensify takes a simpler approach limiting the number of plans available. The individual plan begins at $5/month with no limit on receipts scanning. If you’re working in a team, Expensify offers a $9/user/month plan and a corporate plan that begins at $18/user/month. They also have an enterprise solution customized based on your business’s demands. 

Comparison: Expensify vs Shoeboxed

To help you better visualize the differences between Expensify vs Shoeboxed, we’ve made this handy chart for you: 

ExpensifyShoeboxed
OverviewExpensify is an expense management system for personal and business use. Expensify helps users scan receipts, track expenses, and book travel all in one app.Shoeboxed is the painless solution for freelancers and small business owners to track and digitize their receipts, maximize tax deductions and prepare audit-ready reports.
Platforms supported– Web-based
– iOS
– Android
– Web-based
– iOS
– Android
Language supportedEnglishEnglish
Targeted customers– Freelancers
– Small businesses
– Mid-sized businesses
– Large enterprises
– Freelancers
– Small businesses
– Mid-sized businesses
Customer support– Email
– Phone
– Live support
– Video tutorials
– Phone
– Online
– Video tutorials
Features– One-click receipt scanning
– Credit card import
– Multi-level approval workflows
– Corporate card reconciliation
– Accounting, HR, and travel integrations
– Multi-level coding
– Advanced tax tracking
– Audit and compliance
– Delegated access
– PCI-compliant security
– Automatically identify currency
– Receipt scanning
– Optical Character Recognition
– Human data verification
– Scanned receipts storage
– Receipt search
– Mobile receipts tracking
– Mileage tracking
– Data digitization service
– Gmail receipts archiving
– Business cards management
– Tax filing
– Expense reports
– Multiple international currencies
IntegrationsExpensify integrates with various accounting software as well as HR, travel, and accommodation systems and applications:
– Accounting: Bill.com, FinancialForce, NetSuite, QuickBooks, Sage, Xero, Scan Snap
– Transport: Automatic, Grab, Lyft, Trainline, Uber
– Accommodation: Hotel Engine, HotelTonight, Roomex, TripActions
– Travel Bookings: Flight Sugar, Gallop, Jettly, Lola, Pana, TravelPerk
– Travel: NexTravel, TripActions, Trip Catcher
– Other Integrations: Accelo, Global VATax, PayPal, RevelPOS, Microsoft Dynamics, Financial Force, Workday, TSheets
Shoeboxed integrates with the following third-party solutions:
– QuickBooks
– Xero
– MYOB
– Dropbox
– Evernote
– GoDaddy Online Bookkeeping
– WaveAccounting
– FreshBooks
– OneSaas
– Saasu
– Salesforce
– WorkingPoint
– Bench
– ScanSnap
PricingAlong with the free version, Expensify offers two pricing plans: 
– The Collect plan at $5/user/month
– The Control plan at $18/user/month
Along with the free version, Shoeboxed offers three pricing plans: 
– The Startup plan at $18/month
– The Professional plan at $36/month
– The Business plan at $54/month

In the end, the choice is yours

By comparing the features, integrations, and pricing with your business’s needs, you’ll be able to decide which app is the best fit for your business. Don’t forget to get a free trial before subscribing to experience how the program can benefit you in practical situations.

If you’d like to see more comparisons between Shoeboxed and other accounting apps, let us know in the comments! 

Don’t forget to subscribe to the Shoeboxed blog for more engaging stories about entrepreneurship, staying organized, DIY accounting, together with Shoeboxed‘s latest product updates.