Owning and running a small business is not for the faint of heart. Small business owners are passionate about what they do and often work long and grueling hours. Additionally, many suffer through years of financial losses or marginal profits before business takes off. Given the many and significant personal and financial sacrifices that come with starting and operating a small business, it’s important to take advantage of any and every possible tax break.
While most small business owners know to deduct expenses related to business travel and office expenses, many fail to take full advantage of the many tax deductions to which they are entitled. For example, individuals who have a home office which is used exclusively for business purposes may take advantage of the home office deduction.
Additionally costs associated with the start of a business may be deducted over a period of years with a maximum annual deduction allowance of $5,000. Startup expenses may include fees related to marketing and advertising, employee training and professional services like an accountant or attorney.
Business owners who have suffered financial losses related to customers who failed to pay or who declared bankruptcy may be able to recoup some of their losses through tax deductions. There are two major caveats, one being that a business owner must make reasonable attempts to recover the debt. Additionally, the debt amount must have previously been “included in gross income, according to the IRS.”
While the 2014 tax season is officially over, next year business owners would be wise to take full advantage of any and every tax deduction the IRS allows. It’s important, however, to only take deductions for business-related and legitimate expenses. In cases where a business owner is concerned about previous deductions and learns that he or she is the subject of an IRS audit or investigation, it’s wise to contact an attorney.
Source: Nerd Wallet, “5 Overlooked Tax Deductions for Small-Business Owners,” Steve Nicastro, March 24, 2015