In order to help our Shoeboxed users find the kind of business deductions that can get lost in small business limbo, we asked one of our newest customers to share some of her small business tax secrets. Melissa from Virginia runs a small online marketing startup that is still in its first year of business. Here are her tips for making the most of your small business deductions.
1. Make a list and take copious notes
“I’m on the computer all day, but I still carry paper and pen,” said Melissa. “I have a running list on my desk of all of my business deductions. As new ideas come to me, I add them to the list. Since we’re in our first year, we’ve been paying quarterly taxes, but haven’t had to present all of our deductions to our tax guy yet.
While certain things will be obvious deductions, like the rent we’re paying for our office or the cost of hiring subcontractors, there are other little things I would completely forget about come tax time if I hadn’t written them down. And it’s the little things that add up to big deductions at the end of the year.”
2. Little things to think about
“Since we’re an online marketing firm, there are lots of little monthly expenses that I can write off. We use Social Oomph to automate social media campaigns for many of our clients. It’s a small biweekly expense – like $17 every two weeks – but that adds up at the end of the year. We can also deduct what we pay for international Skype calls, cool WordPress themes we bought for our websites, and Paypal fees. I was especially excited to learn about the Paypal fees because I’d spent years as a freelancer not realizing those were legitimate business deductions.”
3. Nonprofit write offs
“We now have several nonprofits we work with, and many of those services are completely free to the client. At first when they approached us, we wanted to help but didn’t think we could afford it. When I realized I could provide these services as a tax deductible donation to the nonprofit, I was excited to jump on board. We get to help out some great causes, gain some good PR, and get some nice business deductions while we’re at it.”
4. Building a team
According to Melissa, “I was worried about the cost and expense of hiring an accountant and a lawyer – what kind of startup has the money to spend hundreds of dollars on advice every time they make a phone call? But it’s important advice, and we needed it, so we shelled out the cash. Good thing too, because that’s when my accountant told me that her fees counted as business deductions. “
5. Staying home
“We rent an office space, but I also end up working from home a lot of the time. I knew I was able to deduct a portion of my rent, but what I didn’t realize is that I could also deduct things like my electric bill, and improvements and maintenance made to my place. This was a scary one because you have to fill out a separate tax form, but the hardest part of the entire process was measuring the exact square footage of my apartment.”
While each small business is different, many of Melissa’s business deductions are applicable to most small business owners and freelancers.
Which of these deductions have worked for you, and what’s Melissa missing?