Maximize Your Deductions, Reduce Your Taxes, and Always Be Ready for an Audit

The best ways to ensure you maximize deductions:

Keep a separate bank and credit card account for business purposes. These make it much easier to sort your expenses and too guarantee that nothing falls through cracks.
Use Quickbooks Online, or an Excel Spreadsheet, to keep track of your income and expenses.
If you use Quickbooks Online, having the right Chart of Accounts (listing income types, expense types, depending on what type of business) is really important as it will be a foundation of maintaining your books. It can also help you with budgeting come tax time! At DIAKADI, one of our most valuable lessons when we were first starting out, was to hire an expert to set up your books from the start. Then you will have a much easier time of handling the bookkeeping. If you are trying to set-up your Quickbooks and need help from a pro, reach out to Ashley for assistance.

Two high audit areas and what to do about them:

Business Miles – You can keep a log of the trips you took on a piece of paper or in your phone. If you want, you can use an app called MileiQ.
Business Meals and Travel – When you dine out for business purposes, write on the receipt who you dined with and the purpose of the meal. *Free Solution* Take a picture with your phone and save in your email inbox. *Paid Solution* You can use an app called Receipt Bank which also integrates with Quickbooks Online.

“If you are dining with a client or possible partner or discussing business, be sure to keep a calendar marking the meal or coffee as business with someone. Calendar is huge help for travel write offs.”

Please note that Schedule C Businesses are audited more than any other entity by the IRS. If you are operating as a sole proprietor or LLC and file your business on a Schedule C, it is critical to keep accurate records and store your receipts.

Tax Reducing Tips

Business

If your net income (income minus expenses and depreciation) exceeds $25k, it may be time to discuss tax planning with an accountant in order to reduce your tax liability.
Establish a room in your home as your home office and principal place of business. This will allow you to write off miles between your home and gym or studio. If have a two room home, office should have a desk and be functional for actual office. You do not want to claim more than 35% of home as an office area. On average, business owners can claim 7-20% of the square footage of their house.
Don’t forget about writing off all business expenses such as equipment, cell phone, home office expenses, computer software and hardware, fitness memberships and events, professional development (business coach, business books, etc).

Individual

If you have a High Deductible Health Insurance Plan, you should sign up for a Health Savings Account. You can put away $3,450 (single) or $6,900 (married) each year for medical expenses. This will also reduce your tax liability! Sign up for free at www.hsabank.com.
Retirement Options are abundant – Depending on where you and your business is at you can use a Traditional IRA, Solo 401k, or SEP IRA that can save you in taxes each year.

Have specific questions or need help more in any way?
Drop us an email at info@thebusinessmovement.com and we can help connect you with a tax expert.
Best of luck!