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Top 10 Tax Write-Offs for Small Business Owners

Top 10 Tax Write-Offs for Small Business Owners

As a small business owner, tax season can be a stressful time. With all of those forms to mail to employees, expenses to track, and checks to write to the IRS, no-one could blame you for dreading the month of April. But beneath the bureaucratic onslaught, there is one shining beacon of hope: deductions, deductions, deductions. For the small business owner, deductions are a world of plenty.

Like everything to do with the IRS, the rules around deductions can be nuanced, so it’s important to do your research, talk with an accountant, and use a good tax calendar to stay on track of regulations and deadlines. Advises Austin-based Certified Public Accountant, David Coffman, “Make sure to keep good detailed records supporting your deductions for at least 6 years, and fill out the proper forms correctly and completely.”

Here are just a few deductions you won’t want to miss:

1. Travel Expenses

Rest assured that when you stay overnight at a hotel while conducting business away from home, that night will be fully tax-deductible. In fact, every night you spend away for business purposes will also be deductible, as will 50% of any meals you eat out (with or without a client in tow), any rental cars and plane tickets, and sometimes even transcription or translation services while traveling abroad.

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Thinking of extending your stay for a little vacation time? As long as the purpose of your trip is mainly for business, you can still deduct your travel costs to and from the destination. “However,” Coffman cautions, “expenses specific to the personal portion are not deductible.”

No matter what, just make sure to keep good track of your receipts regardless of the total (yes, even if it’s below $75).

2. Auto Expenses

Do you use your car for business? Do you own a company car? Some of the costs associated with gassing up and maintaining that car will be deductible. For 2012, you’ll be able to deduct 55.5 cents per each mile driven, as well as all business-related tolls and parking fees. Don’t just eyeball this, especially if you only own one car—it’s a red flag for IRS eyes. Keep track of the exact miles you drive, enter them into your accounting system or hand them to your bookkeeper, and include a detailed description for each recording.

3. Current and Capitalized Expenses

It’s easy to confuse current and capital expenses, so it’s worth defining them separately. Current expenses are things like rent and electricity bills—those ongoing costs that keep both your office and your business up and running. Capitalized expenses, on the other hand, are expenditures like equipment and vehicles. Current expenses are simply deducted from your business’ yearly gross income, while capitalized expenses must be deducted over a number of years. A general rule of thumb is this: if an item has a shelf life of longer than one year, it’s capitalized. That being said, many items such as office supplies and repairs can be deducted as current business expenses, but only after your business has opened its doors. Before that, they’ll be capitalized. Confusing? Maybe, but understanding these distinctions and filing accordingly will be well worth the effort in the end.

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4. Software and Subscriptions

Once upon a time, businesses looking for deductions in the area of software and subscriptions had to depreciate the cost of computer software over three years; see current vs. capitalized expenses. Now, however, computer and software expenses can be cited as expenses up front using the Section 179 election, just like magazine subscriptions.

5. Health Care Costs

Though exact amounts and procedures will differ based on the type of business filing you have, many health care costs are deductible for small business owners. For proprietorships, health insurance premiums are 100 percent deductible on Form 1040 as an adjustment to income, though that deduction can’t be more than your business’ net profit, and the deduction is void if you’re eligible for any other kind of health coverage—including those of your employed spouse. However, if your spouse worked for your business, then his or her premiums are also fully deductible.

Things will be a little different if you’re filed as a C-Corporation. In this case: “Health care costs, including out of pocket expenses, are deductible as a business expense under a health reimbursement arrangement,” says Coffman. You’ll want to contact accountant to get this set up at least in your initial year as a C-Corporation.

6. Bad Debts

It’s never any fun when a client doesn’t pay or a vendor doesn’t deliver, but if you’ve got a bad debt on your rolls, it may be deductible, but only for accrual basis rather than cash basis taxpayers (learn the difference here). Says Coffman, “If an accrual basis taxpayer has billed for his goods and services, he may write off as a bad debt any amounts not collected. A cash basis taxpayer may not write off uncollected fees for services or goods, but may write off the cost of the goods that were not paid for.”

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Unfortunately, this applies only to goods, not to services, which are a lot more difficult to quantify. Alas, you truly cannot recover lost time.

7. Home Office Deductions

Home office deductions are popular among small business people. If you work from home, you can deduct for depreciation, utilities, insurance premiums, mortgage interest and repairs. However, the deduction counts only for that space, and you must use the area regularly and exclusively for business. If you think this is a good excuse to get a break for all of that yard landscaping you’ve been paying for, think again: the rules around this deduction are strict, and it is often a trigger for audits, so learn them well before filing incorrectly.

8. Business and Professional Fees

If you’ve bought business books, paid any fees to lawyers, tax professionals and more, and their service is clearly related to this year’s activities, these all qualify as deductions. However, if these fees relate to future years, they’ll need to be deducted over the life of the benefit they provide.

9. Retirement Contributions

If you’re self-employed and contribute to a SEP-IRA or Keogh, these can all be deducted on your personal income tax return.

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Adds Coffman, “This is one of the few areas where you can claim a deduction in the current year for amounts paid in a later year. You get to see the effect of the deduction before you actually commit to it. Some plans, however, must at least be established prior to the end of the year.”

10. Phone Calls

Business-related phone calls are fully deductible, even if you conduct them on your personal cell phone or home phone. As with mileage, you just have to keep good records that separate the business calls from the personal ones. A good way to do this is to circle business calls and write a description on your bills, total them up and keep a copy to be added into your final returns. If you add a second line or buy a cell phone that’s dedicated primarily to business, you’ll be able to fully deduct any regular fees and charges associated with the line.

Take-Away

When tax season comes around, there’s a lot for small business owners to think about, and just as many deductions to benefit from as well. Do your research, keep abreast of the latest regulations, and contact a good accountant early in the year to get it done right. Don’t wait until the last minute, or you may miss out!

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Last Updated on January 21, 2020

How to Increase Work Productivity: 9 Ground Rules

How to Increase Work Productivity: 9 Ground Rules

We all have those days when completing our assigned tasks seems beyond reach. With the temptation of social media, mobile games, and the internet in general—not to mention the constant bustle of people in the office—it’s easy to fall prey to disruptions and distractions at work.

So, what can we do about it? How to be productive at work?

While we don’t have a foolproof system that can completely eliminate disturbances and diversions, we do have 9 ground rules that can be applied to help give your productivity levels a boost.

Keep reading to find out our tips on work productivity.

What Does It Mean to Be Productive?

How to be productive at work?” is the age-old question plaguing employees and employers alike around the world. Regardless of where you work and what you do, everyone is always looking for new ways to be more efficient and effective.

But what does being productive actually entail?

Completing more tasks on your list or working longer hours doesn’t necessarily mean you’re being more productive. It just means you’re more busy, and productivity shouldn’t be confused with busyness.

Productivity means achieving effective results in as short amount of time as possible, leaving you with more time to enjoy freely.

It involves working smarter, not harder. It means refining processes, speeding up workflows, and reducing the chances of interruptions.

Productivity is best achieved when looking at your current way of working, identifying the bottlenecks, flaws, and hindrances, and then finding ways to improve.

9 Ground Rules on How to Be Productive at Work

1. Avoid Multitasking

Multitasking can give the impression that more tasks can be accomplished as you’re doing multiple things at once. However, the opposite is true.

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Research has shown that attempting to do several things at the same time takes a toll on productivity and that shifting between tasks can cost up to 40 percent of someone’s time.[1] That’s because your focus and concentration is constantly hindered due to having to switch between tasks.

If you have a lot of tasks on your plate, determine your priorities and allocate enough time for each task. That way you can work on what’s urgent first and have enough time to complete the rest of your tasks.

2. Turn off Notifications

According to a Gallup poll, more than 50 percent of US smartphone owners admit to checking their phones a few times an hour.[2]

Switching off your phone—or at least your notifications—during work hours is a good way to prevent you from checking your phone all the time.

The same applies to your computer. If you have the privilege of accessing social media on your work desktop, switch off the notifications on there.

Another good tip is to logout from your social media accounts. Therefore when you feel the urge to check it, you might be swayed because your page isn’t so easily accessible.

3. Manage Interruptions

There are certain disruptions in the office that are unavoidable such as your manager requesting a quick meeting or your colleague asking for assistance. In order to deal with this, your best approach is to know how to handle interruptions like a pro.

Be proactive and inform the people around you of your need to focus. Turn your status on as “busy/unavailable” on your work chat app.

If you’re on a deadline, let your colleagues know that you need to concentrate and would really appreciate not being interrupted for the moment, or even work from home if that’s a feasible option for you.

By anticipating and having a plan in place to manage them, this will minimize your chances of being affected by interruptions.

4. Eat the Frog

Mark Twain once famously said that:

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“if it’s your job to eat a frog, it’s best to do it first thing in the morning. And if it’s your job to eat two frogs, it’s best to eat the biggest one first.”

What this basically means is that you should get your biggest, most urgent task out of the way first.

We all have that big, important task that we don’t want to do but know we have to do because it holds the biggest consequence if we don’t complete it.

Eat the frog is a productivity technique that encourages you to do your most important, most undesirable task first. Completing this particular task before anything else will give you a huge sense of accomplishment. It will set the ball rolling for the rest of the day and motivate you to eagerly complete your other tasks.

5. Cut Down on Meetings

Meetings can use up a lot of time, which is time that can be used to do something useful.

You have to wait for everyone to arrive, then after the pleasantries are out of the way, you can finally get stuck into it. And sometimes, it may take a whole hour to iron out one single issue.

The alternative? Don’t arrange a meeting at all. You’ll be surprised at how many things can be resolved through an email or a quick phone call.

But that doesn’t mean you should eliminate meetings altogether. There are certain circumstances where face-to-face discussions and negotiations are still necessary. Just make sure you weigh up the options prior.

If it’s just information sharing, you’re probably better off sending an email; but if brainstorming or in-depth discussion is required, then an in-person meeting would be best.

6. Utilize Tools

Having the right tools to work with is crucial as you’re only really as good as the resources you have at your disposal. Not only will you be able to complete tasks as efficiently as possible, but they can streamline processes. Said processes are essential to a business as they manage tasks, keep employees connected, and hold important data.

If you’re the manager or business owner, ensure your team has the right tools in place.

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And if you’re an employee and think the tools you currently have to work with aren’t quite up to par, let your manager know. A good team leader understands the significance of having the right tools and how it can impact employee productivity.

Some examples of tools that could be used:

Communication
  • Slack for team chat and collaboration.
  • Samepage for video conference software.
  • Zendesk for customer service engagement.
Task Management
  • Zenkit for task and project collaboration.
  • Wunderlist for listing your to-do’s.
  • Wekan for an open source option.
Database Management
Time Tracking
  • Clockify for a free tracker.
  • TMetric for workspace integrations.
  • TimeCamp for attendance and productivity monitoring.

You can also take a look at these Top 10 Productivity Tools to Help You Achieve 10x More in Less Time.

7. Declutter and Organize

Having a disorganized and cluttered workspace can limit your ability to focus. According to researchers, physical clutter can negatively impact your ability to concentrate and take in information.[3] Which is why keeping your work environment well ordered and clutter-free is important.

Ensure you have your own system of organization so you know what to do when the paperwork starts to pile up.

Being organized will also ensure that you know where to find the appropriate stationery, tools, or documents when you need it. A US study reveals that the average worker can waste up to one week a year looking for misplaced items.[4]

Here’s a useful guide to help you declutter and organize: How to Declutter Your Life and Reduce Stress (The Ultimate Guide)

8. Take Breaks

Taking regular breaks is essential for maintaining productivity at work. Working in front of a computer can lead to a sedentary lifestyle which can place you at a higher risk of heart disease, diabetes, and obesity. Even a 30 second microbreak can increase your productivity levels up to 30 percent.

As well as your physical health, breaks are also crucial for your mental and emotional wellbeing. That’s because your brain is like a muscle, the more it works without a break, the easier it is for it to get worn out.

Ensuring you actually take your breaks can prevent you from suffering from decision fatigue. It can also help boost creativity.

Take a look at this article and learn why you should start scheduling time for breaks: The Importance of Scheduling Downtime

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9. Drink Water

Although we know we should, it’s easy to forget to drink enough water during the working day.

Many of us turn to tea or coffee for the caffeine hit to keep us going. However, like taking breaks, drinking water is essential for maintaining productivity levels at work. It’s simple and effective.

Not drinking enough water can lead to dehydration and also headaches, tiredness, and weight gain.

A good tip to avoid dehydration is to keep a water bottle at your desk as it can serve as a reminder to constantly drink water.

If you find the taste of water a little bland, add some fruit such as cucumber or lemon to give it a better taste.

You can also get more ideas on how to drink more water here: How to Drink More Water (and Why You Should)

The Bottom Line

The preceding 9 ground rules on work productivity aren’t the be-all, end-all. You and the company you work for may have other tips on how productivity is best increased and maintained.

After all, it’s something that can be perceived differently depending on the exact job and work environment.

In saying that, however, the 9 ground rules serve as a good foundation for anyone finding themselves succumbing to disruption and distraction, and are looking for ways to overcome them.

A good tip to keep in mind is that change doesn’t happen overnight. Start small and be consistent. If you slip up, just dust yourself off and try again.

Developing habits happens gradually, so as long as you keep up with it, you’ll soon start to notice the changes you’ve been making and eventually enjoy the fruits of your labor.

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Featured photo credit: Cathryn Lavery via unsplash.com

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