Simple Small Business Deductions Checklist For Tax Season

A simple checklist to double-check that you’ve done everything the right way to claim your business deductions.

small business tax deductions checklist

For many people, tax time is stress time.

During this period, you go over your finances for the past year, gather all relevant paperwork, calculate numbers, fill in form after form, submit all the required documents to the IRS, and then either pay your taxes or wait for a refund! 

When you file your business deductions, you don’t want to miss out on any possible tax write-offs or make any mistakes because you might lose more money on taxes than you should. 

So, how can you ensure you’ve done everything correctly to claim your business deductions? 

To help you with this, we’ve created a small business tax deductions checklist of things you need to get done to claim your deductions without hassle.

Let’s get to it!

The essential small business tax deductions checklist

Use this checklist before filing your tax return to have your expenses deducted correctly:

1. Understand what qualifies as a tax deduction

Small business tax deductions, or tax write-offs, are allowable expenses that can lower your business’s taxable income. Your business is taxed on your net income, which is determined by deducting your company expenses from your gross income. So, the more deductions you can claim, the fewer taxes you pay. 

According to the IRS, you can only deduct an expense if it meets the following conditions: 

  • An expense is ordinary if it is common and accepted in your industry.
  • An expense is necessary if it is helpful and appropriate for your business.

So, for example, if you own a small printing company, the cost of ink will be an ordinary expense, and travel expenses to attend an industry convention will be necessary. 

Knowing what deductions are permissible will help you avoid claiming ineligible expenses, which might cause you severe IRS penalties. 

2. Choose the right type of tax forms

The next thing you need to do is file the right tax form because some types of deductions require separate forms. If you use a software program to file your taxes, it will probably present you with all the required forms based on the responses you provide to specific tax inquiries regarding your particular business.

If you’re going to file your deductions by yourself, here are some tax forms you need to know: 

Schedule C (Profit or Loss From Business)

You must use Form 1040 Schedule C to claim the vast majority of your tax deductions. Schedule C contains several sections, including a part where you can calculate your cost of goods sold and vehicle expenses.

Form 8829 (Business Use of Home)

If you operate a small business out of your home, you can claim the associated expenses on Form 8829. You can use the form to determine the amount of your home that you exclusively use for business purposes and then subtract that percentage from your total spending for typical real estate-related costs like mortgage interest, rent, insurance, and utilities. Additional costs may also be deducted: for example, costs for repairs and upkeep of that particular location, if those expenses are directly tied to that company space.

Schedule SE (Self-employment Tax)

While Schedule SE is used to calculate any self-employment (SE) taxes due, it also contains a section where you can claim a deduction related to your small business. You can deduct half of your SE tax in figuring your adjusted gross income and carry it over to the main section of Form 1040. This deduction only affects your income tax. Neither your net earnings from self-employment nor your SE tax remains unaffected.

3. Learn what deductions your business can claim  

Most business expenses are tax-deductible. Below are some of the most common tax write-offs that your business might be eligible for:

  • Legal and professional fees 
  • Rent 
  • Home office
  • Office supplies
  • Work-related car use 
  • Business travel expenses
  • Phone and internet expenses
  • Advertising and promotion 
  • Retirement plans
  • Subscriptions
  • Employee benefits and salaries
  • Medical expenses
  • Furniture

Check out the full list of tax deductions in the following article, “Tax Deductions Checklist: What Your Small Business Can Claim Every Tax Season.”

While many business expenses are tax-deductible, some are not or can only be claimed under particular conditions. In any case if you’re not sure whether you can deduct the expense or not, go through and recheck the conditions on the IRS’s official guide on business expenses. If you still feel uncertain, consult a CPA or other tax professional for further guidance, and the fee you pay for such guidance will be tax-deductible.

4. Keep and organize your receipts 

To ensure you have all your deductions counted by the IRS, you must provide proper documentation or evidence of those expenses when filing your tax return. In other words, to file your small business tax deductions accurately and strategize for the most savings on your tax, you must store your receipts correctly. If you cannot show this documentation in the event of an audit, you might face extremely hefty penalties from the IRS. 

You can start by categorizing your receipts based on the nature of every expense. For example, receipts for business meals go together in a folder, and home office cost-related receipts stay in a separate folder. Also, according to the IRS, depending on how you file, you should maintain your tax records for 3–7 years. For instance, they advise maintaining your data for 7 years if you file a claim for a loss.

Shoeboxed can help you stay on top of receipt management throughout the year by digitizing, categorizing, and storing your receipts safely in the cloud.

5. Be aware of the deadlines

Normally, the IRS sets the due date for filing your federal tax return as April 15 if you’re a calendar year filer. However, if your company has a fiscal year that is different from the calendar year, your return must be submitted no later than the 15th day of the fourth month following the end of your fiscal year. The deadline is postponed to the following business day if it falls on a Saturday, Sunday, or legal holiday.

For example, the last day to file taxes for 2021 taxes was April 18, 2022, for almost every state. But if you resided in Maine or Massachusetts, your last day to file taxes was April 19, 2022, due to holidays. If, for any reason, you can’t complete the filing of your tax deductions and taxes, you can submit Form 4868 to request an extension to file later in the year.

In conclusion

We all like deductions, but not the preparation and paperwork involved in the process. But it doesn’t always have to be difficult. Follow our small business tax deductions checklist for what needs to be done and by when, and you’ll avoid missing important steps.

About Shoeboxed 

Shoeboxed supports multiple methods for receipt capture: send, scan, upload, forward, and more!

You can stuff your receipts into one of our Magic Envelopes (prepaid postage in the US). Use our Shoeboxed app to snap a picture while on the go. Auto-import receipts from Gmail. Or forward a receipt to your designated Shoeboxed email account.

Turn your receipts into data and deductibles with our expense reports that include IRS-accepted receipt images.

Join over 1 million businesses scanning & organizing receipts, creating expense reports and more—with Shoeboxed.

Try Shoeboxed for FREE now! 

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