Tips To Get The Most Tax Deductions For Your Business

What could be difficult about filing your business’s 2019 income tax return? Plenty. Not to worry though, Donohoo Accounting Services is here to help! Every business has unique needs and you’ll need an experienced professional to help find all your deductions, but here are some tips about the three kinds of records your accountant will definitely need.

Income/Earnings Records

Because most businesses use electronic means to capture every transaction of the sale of goods or services, income records should be easy – though perhaps voluminous – to collect. Be sure to review your business’s income records, however, to look for any obvious errors such as missing information. Complete income records should include:

  • The gross amount of each individual sale,
  • Any returns or discounts credited against your business’s income,
  • Interest earned from business bank accounts (from your year-end bank statement or Form 1099-INT) and,
  • Any other income from non-sales sources.

Documentation of Expenses

Perhaps the most documentation required for your business tax filing falls into the category of expenses. You must account for more than a dozen different kinds of expenses on your tax form. These include all employee wages, rent or lease payments (including vehicle leases), insurance, travel, office supplies, and advertising and communications (such as telephone, fax and Internet).

Additionally, within these expense categories, there are sub-categories. Be sure to consult with a tax professional for a complete list of expense categories to be sure you don’t overlook any potential deductions.

Inventory Details

If your business maintains a physical inventory of goods, you will need to have documentation of your inventory totals at the beginning and end of the year along with its dollar value. As well, be sure you also have records of any inventory purchased over the course of the year. Remember to account for any inventory items that were used for business or personal needs, and the value of any supplies or materials on-hand that were purchased to operate the business.

For businesses that track inventory electronically, these records should be easy to access. But again, remember to check – and correct – any errors or irregularities between your inventory records and your actual physical inventory.

Additionally, some forms of taxable business income now have a lower rate, thanks to a new deduction for qualified business income (QBI) worth up to 20 percent. Be sure to check out the details in our blog.

The professionals at Donohoo Accounting Services have been helping small businesses file annual tax returns for more than 20 years. For a free consultation, call Donohoo Accounting today at 513-528-3982. Check us out on FacebookTwitter and LinkedIn for our latest updates and tips!

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5 Tips to Lower Your Tax Bill

As tax season approaches, it’s important to make sure you’re getting the most on your return. If you think you’re paying too much on your taxes it may be because you may not be taking advantage of the available tax credits and deductions. Because your taxes are based on your taxable income rather than your gross income, there’s plenty of ways to use standard deductions or “write-offs” to pay less taxes. These 5 tips can help you reduce your bill and get the most on your refund this tax season.

Claim the Right Credits

Claiming tax credits is one of the best ways to help lower your tax bill and there’s a number of options available to claim. The IRS offers a number of credits for individuals and families ranging from credits for dependents, earned income and savings, housing, as well as healthcare and education. Finding the right credits and taking advantage of them helps you reduce what you pay and maximize your return.

Check Your Deductions

Unlike a tax credit which is a dollar-for-dollar reduction of your tax bill, a tax deduction reduces the amount of tax you are liable for, lowering your taxable income. The money you spent contributing to healthcare savings accounts or an individual retirement account can be deducted from your taxable income. There are also specialized deductions, including deductions for self-employed individuals and teachers for out of pocket expenses on supplies.

Contribute to Your Retirement Fund

One of the easiest ways to reduce your tax bill is with contributions to your individual retirement account or IRA. Individuals can contribute up to $6,000 to their retirement account per year. Any money you add is considered a pre-tax contribution, which can be deducted from your taxable income, helping to lower your tax bill. Additionally, most IRAs are tax-deferred, which means you won’t have to worry about paying taxes on them until you’re ready to withdraw the funds.

Donate to Charity

Volunteering and giving to charities are more than just a way to give back to your community. In addition to monetary donations, clothing, toys, books and other goods are considered charitable deductions that can go towards reducing your tax bill. And while your time spent volunteering isn’t eligible for a deduction, certain expenses are including purchasing supplies and travel costs.

Invest in a 529 Plan

If you have children, investing in their education not only benefits them, but your contributions can help lower your tax bill. Current 529 college savings plans are one of the easiest ways to save money for college and in many states, you can deduct your contributions off your taxable income. While these deductions aren’t allowed on federal income returns, they can be applied to your state income taxes.

The best way to lower your tax bill this season is with the help from knowledgeable professionals. For the last 20 years, Donohoo Accounting Service has been helping businesses and individuals in the greater Cincinnati area find the most deductions and maximize their tax returns. Contact us today or call us at 513-528-3982 for a free consultation. Check us out on Facebook, Twitter or LinkedIn for our latest updates!

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