Missed Business Expenses on Taxes

by Dual Income No Kids on February 23, 2010 · 4 comments

PLEASE LEAVE US A COMMENT FOR THIS WEEK’S BOOK GIVEAWAY!!!

In keeping with our tax week with the book giveaway from The Tax Lady, Roni Deutch, here are the her top ten tax-record keeping tips for small business owners:

  1. Keep business and personal tax records separate.
  2. Open a separate checking account for your business and keep your records accordingly.
  3. Keep all records and receipts to support income and expenses claimed.
  4. Use a separate credit card for your business.
  5. Keep a business use mileage log for your service vehicle.
  6. Avoid cash purchases that do not produce a valid receipt.
  7. Reconcile your bank and credit car statements each month.
  8. Highlight all long distance business calls on your personal (home) telephone bill.
  9. Get a receipt for everything. If the expense was incurred for business purposes or in the course of producing business income, it is likely to be tax deductible.
  10. Keep all records and receipts in a safe, dry location.

One of the things that Roni hits on throughout her book is the importance of staying organized, as this will pay off in spades.

A favorite example of this from the small business perspective is the real cost of missing business expenses. Say you forget a $20 receipt that you should have claimed, once you add in the overstating of your taxes as well as the tax increase, this comes out to cost you $8.06 additional in taxes. She goes into all of the detail on how this is calculated, and it makes you really realize the power of missed expenses.

Please leave us a comment and we will be giving away a copy of the Tax Lady’s book on Friday!

Miel

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{ 4 comments… read them below or add one }

1 Wes Masters February 23, 2010 at 12:24 pm

One other tip that's worked well for me: keep your receipts separate, too. Something as simple as using envelopes works well for me – one for business stuff that's using my business card and will be expensed and another for personal purchases.

2 Dual Income No Kids February 23, 2010 at 12:34 pm

Wes – Good comment. When I travel for work I keep reimbursable expenses on one side and my personal receipts on the other. It is easy to miss receipts at the end of the day otherwise. At least this way I know I should be reimbursed, and then I can rack my brain for what it was.

I'm most often in another country when I travel for work, so that means I have to deal with multiple currencies and other languages on receipts. Sometimes in places with other alphabet systems, I've found it helpful to write what was being purchased before it even goes into my wallet. Otherwise later you have to figure it out!

Cheers,

Miel

3 2million February 23, 2010 at 4:23 pm

I have a bad habit of business/personal mixing expenses onto whatever credit card Im using (usually the one with currently the biggest rewards), but my wife and I have gotten into the habit of dumping every receipt we get into a shoe box for the year. In the shoe box we have several envelopes for things such as medical expenses, business expenses, rental expenses, etc. If the receipt isn't in one of those categories it just gets dumped into the shoe box. This has worked pretty well for us as I have needed to track down an odd receipt from time to time.

4 Dual Income No Kids February 23, 2010 at 5:39 pm

2Million – I couldn't agree more! I think you've inspired me to do another post on all the reasons you should keep your receipts in general. Think of how much money is lost just because you don't have a receipt.

Thanks for your comments, wish you luck with the giveaway as well!

Miel

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