Are you getting the most out of your Shoeboxed account?

If you just signed up for a Shoeboxed account, it’s a good idea to make sure you’re taking advantage of all the powerful tools your account has to offer. Here’s how.

Not to toot our own horns, but we think Shoeboxed is pretty darn intuitive and user-friendly. But if you’re just getting started, it’s a good idea to make sure you’re taking advantage of all the powerful tools your account has to offer.

Here are a few common mistakes we frequently see small business owners making when they first start using Shoeboxed:

Treating every document as a receipt

Remember that Shoeboxed is for digitizing all of your paper documents, no matter their size or shape! That’s why we’ve created tabs for business cards and other documents.

It’s important to weed out any documents you don’t want included in your tax totals from the Receipts page – otherwise, when you go to generate a report, the application will pull those documents into your spreadsheet.

It’s easy to separate mislabeled items like bank statements and business cards from your receipts. Simply click on the document in question, scroll down to the lower righthand corner of the pop up screen, and click the Not a receipt button to choose the appropriate section to send it to.

Failing to use categories

Shoeboxed uses a sophisticated algorithm to detect which tax category each receipt should be placed in based on what you purchased and where.

But not all receipts all created equal! Sometimes the ink gets smudged, or maybe you visited a mom and pop shop that our algorithm doesn’t recognize. In these cases, it’s important to make sure each of your receipts isn’t left without the right category.

Specify the date range in question, then under the categories tab, select Uncategorized. This will pull up all of the receipts that Shoeboxed did not categorize.

From here, you can adjust totals and place each receipt into its proper tax write off category.

If you don’t categorize your receipts, you could be missing out on lucrative deductions come tax time!

Skipping the notes section

The notes section in your receipt manager is a powerful tool that can save you hours of time when doing your taxes.

When you select an individual receipt, you’ll see the scanned image of that receipt. Next to it, you’ll see a section labeled Receipt Notes. This is where you can add additional information about when and where the purchase was made, and more importantly, why it’s a valid tax deduction.

When exporting your receipts to a spreadsheet, your notes will automatically be included. This will allow your tax professional to see all of the information they need regarding each particular transaction.

When you don’t complete the notes section, you may have to field email after email from your accountant asking you “What is this expense?”

Remember that just because you remember the $250 dinner was a business dinner, doesn’t mean your tax preparer knows that. Getting specific in the notes section will make it easy for them to approve the write-off, saving you both time (and saving you money!).

What’s your favorite feature within your Shoeboxed account? What features do you still have questions about? Let us know in the comments — we’re here to help!

How to Avoid an Audit

Chances are high that you’ll never have to worry about being audited, but it’s something many small business owners and individuals fear. While it’s not possible to completely avoid an audit, you can decrease your chances somewhat by avoiding these IRS “eyebrow raisers.”

Chances are high that you’ll never have to worry about being audited.  The IRS audits less than 1% of all income tax returns submitted each year, with that number expected to trend even lower in the future.

Budgets cuts, an increase in identity theft cases, and last year’s government shutdown have Uncle Sam pretty backed up, so audits aren’t a huge priority – at least for now.

If you’re scanning receipts, tracking your write-offs and declaring all of your small business revenue, you should have nothing to worry about even if you were audited.  However, even if your books are spotless, no one wants to trigger an audit. It’s like volunteering to go to the dentist.

While it’s not possible to completely avoid an audit, you can decrease your chances somewhat by avoiding these IRS “eyebrow raisers.”

You’re more likely to raise an IRS eyebrow or two if you:

Make a ton of money

The more you make, the more Uncle Sam keeps his eagle eye on your.  People who make more than $200,000/year are more likely to be audited than those who don’t.

This certainly isn’t a reason to purposely avoid achieving that 6-figure goal you set for yourself.  Just know that once you meet that goal, you need to be even more diligent about tracking your income and expenses.

“Forget” to declare your income

Remember that the IRS has access to your income forms. If an employer or contractor submits a W2 or 1099 form for you, and you don’t include that income on your tax return, the IRS immediately gets suspicious.  Make sure all current and past employers, clients and contractors have your current mailing address so you get all of your tax forms from the previous year.

Also, keep in mind that you’re ultimately responsible for declaring your income. If a client does not issue you a 1099, it doesn’t mean you don’t need to claim that income! They made have made a mistake, but you still need to let the IRS know how much they paid you.

Go crazy with the donations

If you make $75,000/year but are claiming charitable donations of $2 million, Uncle Sam will become a bit concerned. You can absolutely take advantage of the donation deduction, but make sure it’s at or around what’s reasonable for your income level. The IRS actually has an internal way to measure the average annual donation amount for all tax brackets. Use common sense.

Claim a home office deduction

This is a tricky one. The home office deduction is a completely legitimate write-off for many small business owners. The reason it raises a flag with the IRS is because many people attempt to claim a higher amount than they’re entitled.

In order qualify, you must use an area of your home for business, and only business. This doesn’t mean that sometimes you come home from work early and work on the couch. It also doesn’t mean that your desk doubles as the dining room table.

Also, remember that you’re only allowed to claim things like utilities and square footage for the area of your house that constitutes the office. You can’t write off monthly electric expenses or Internet charges for the house as a whole.

Drive a “business only” vehicle

If you take a deduction because you’re using a vehicle for business, it may be more difficult to avoid an audit. Be sure that the vehicle in question is really only used for business purposes, and that you’ve kept detailed, accurate records of the vehicle purchase, maintenance and mileage.

Remember that while it’s not always possible to avoid an audit, it’s absolutely possible to survive an audit unscathed. Detailed record-keeping throughout the year will be sure to keep the IRS at bay.

Have you ever been audited? What was it like?

No Rendering of Advice – The information contained in here represents the opinion of Shoeboxed, Inc. and is provided for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant or attorney. We advise not to act upon this information without seeking the service of a professional accountant. Any U.S. federal tax advice contained in this website is not intended to be used for the purpose of avoiding penalties under U.S. federal tax law. 
Accuracy of Information – While we use reasonable efforts to furnish accurate and up-to-date information, we do not warrant that any information contained in or made available is accurate, complete, reliable, current or error-free. We assume no liability or responsibility for any errors or omissions in the content of this website or such other materials or communications.

The Truth About Business Travel Deductions

Business travel deductions are some of the most common deductions taken by small business owners, but they’re also the most misunderstood.

Many of the expenses incurred while traveling for business count as tax write-offs, but there are two important distinctions to keep in mind:

  1. Figuring out whether you’re really traveling, at least according to the IRS.
  2. Determining which travel expenses can be written off, and how much can be written off (i.e. not every expense is 100% deductible).

Are you traveling?

You may have a heck of a commute to work every day, even traveling out of state to get to your place of business. You may also frequently travel to different job sites, or spend a few days per week at a different location.

However, none of the above necessarily means you can deduct expenses under the business travel umbrella.

The IRS is chiefly concerned with the location of your business home base. Let’s say you live in Orange County, but you work in West Hollywood. (What are you, crazy?)

With such a tough commute, you’ll probably have to stay in West Hollywood during the week, and return home to the OC on weekends. According to the IRS, neither the time spent in WeHo or the OC is time spent “traveling.” Since your tax home is in West Hollywood, the money you spend on hotel rooms and eating out is not considered a business travel deduction because you are, at least according to Uncle Sam, already “home.”

You aren’t officially traveling until you’re required to stay overnight away from your business home. The overnight stay has to be necessary, too – you can’t take a meeting an hour away from the office then decide to stay in a hotel just because you don’t feel like driving back (well, you can – you just can’t write it off.)

Basically business travel deductions can only be applied to “regular” business travel; the kind where you get on a plane (or drive really far), stay in a hotel, and engage in some sort of business activity.

Is it a write-off?

Once you’ve determined that you’re officially traveling for business, it’s time to go nuts, track every penny you spend, and write off every dime. Right?

Unfortunately, not all business travel write offs are created equal.

Here is a basic breakdown of expenses that can be written off while traveling for business, and the percentage of each item that can be deducted:

  • Hotel rooms and lodging: You can deduct up to 100% of the cost of your accommodations while traveling for business. Might as well spring for the 5-star hotel, as long as it’s within a reasonable distance of your business location.
  • Airfare and transportation: If you’re paying with points or frequent flyer miles, you cannot deduct the cost of airfare. If you’re paying out of pocket, airfare is usually 100% deductible. Rental cars, cab fare, tolls, shuttle rides, gas and/or mileage is all deductible as well – just be sure to scan your receipts using the Shoeboxed app (a free download for iOS and Android!) on your smartphone to track these easy-to-forget expenses.
  • Meals and entertainment: Your meals are usually only 50% deductible. Entertainment may be 50% deductible as well if you can prove it’s related to business. For example, if you’re at a conference in Vegas and you treat yourself to a Cirque du Soleil show, that’s probably not going to fly. If, however, you’re treating a group of investors to a Cirque du Soleil show, Uncle Sam will be more inclined to approve the deduction.
  • Tips: Be sure to keep track of every tip you give, because they’re 100% deductible while traveling for business. An easy way to do this is to edit the receipt on which you tipped within your Shoeboxed account. When you upload your receipt from the hotel, for instance, you can add a note indicating how much you tipped the bellhop, the maid, etc.
  • Dry cleaning: There’s no need to spend money on dry cleaning at home when Uncle Sam will foot the bill while you’re traveling. Feel free to have your clothes sent out and take the deduction (within reason, however – lugging your entire wardrobe to a two-day conference in Tucson might look suspicious).
  • Internet and office expenses: Any expenses incurred while using the hotel’s business center, like sending faxes, scanning, printing, or using the Internet, can all be deducted up to 100%. If you need to buy office supplies or pay to use WiFi within the conference center, those things are deductible too.

What questions do you have about business travel deductions? Let us know in the comments!