8 Common Missed Tax Deductions for Small Businesses

Most small businesses use at least some petty cash. Petty cash is cash that you keep back for your business in order to make change for customers or to pay for small purchases that your business needs to succeed. If you keep good records of what you spend the money on, you can deduct much of the costs during tax season. Whether you or your employees are responsible for using petty cash, be sure to note what you spent it on, how much you spent, and when you spent it. Then, once a month, input all of the records into your bookkeeping system. This can add up to hundreds or even thousands of dollars in savings come tax season.

If you work from a home office, you may be able to deduct some of the expenses according to the IRS home office deduction policies. Typically, you can deduct $5 for every square foot of space that you use for your home office, although there is a cap of 300 square feet. It isn't just the space itself that you can deduct from your taxes, either. You can also make deductions for insurance, equipment depreciation, and a portion of the utilities that you use to operate your home office.

If you use your car a lot for work, you may be able to deduct some of the expenses related to the travel. This includes mileage used to visit clients, move between workspaces, or go to business meetings. There are two different ways that you can deduct these expenses. The easiest way is to take the standard deduction that the IRS provides. However, if you think that you could save more money by keeping detailed bookkeeping records, it is a good idea to do so. Use the log to record the mileage that you use traveling for your job as well as the exact amount of expenses, such as putting fuel in the car or changing its oil. Keep in mind that you'll need to keep receipts to prove your expenses as well as records of your destination for each trip.

If you travel overnight for work, you may be able to deduct some of the related expenses from your taxes each year. However, keep in mind that this is only true for business-only relationships. If you're traveling for pleasure as well, you won't be able to make the deductions. To save money on your taxes for work travel, you must keep meticulous records. You can make deductions for hotel or Airbnb stays, airfare, dry cleaning, meals, and more. Keep in mind that the IRS changes the qualifications from time to time, so always be sure to read the guidelines related to deducting travel expenses before doing so.

Depending on your work situation, you may be able to add document preparation to your bookkeeping and deduct some types of preparation from your taxes each year. Think about the costs you incurred when creating your business plan, getting your business license, or applying for a loan. You can deduct the expenses related to these as well as any that you incurred for printing and binding the documents. You can also include some professional fees related to hiring an attorney or accountant to help you fill out loan information or prepare your business plan. However, you cannot deduct documents related to your everyday work or to buying business assets.

What type of business do you run? Did you know that you may be able to claim a 20% deduction if your legal structure falls under a partnership, S corporation, or sole proprietorship? Eligibility for this deduction depends on how much money you've earned and whether your trade is a business or service type. Because this one can get a bit complicated, it may be a good idea to work with a professional CPA if you hope to claim this deduction.

The tax you pay to develop real estate or install personal property for your business is known as a carrying charge. This information should be included in your bookkeeping. Loan fees or interest is another type of carrying charge. Sometimes, you can deduct these charges from your taxes. This is typically true if the charge depreciates over time. You may also be able to deduct bank fees, including sales taxes. To ensure you have the proper documentation for this type of deduction, keep track of every cost you incur for purchasing property, including storage, insurance, setup, and incidentals. Then, add them to the cost of the asset you installed to create a basis cost.

When it comes to business taxes, you can deduct 100% of the amount that you contribute to your retirement plans. However, it's important to keep in mind that there are limits to how much you can contribute. There are several different types of plans.

• Keogh Plan – This tax-deferred plan uses defined-benefit or defined-contribution methods.

• Roth IRA – You contribute money after paying taxes for this type of plan.

• Savings Incentive Match Plan (SIMPLE) IRA – This plan allows you to put a percentage of money toward your retirement.

• Simplified Employee Pension (SEP) IRA – This plan is for self-employed people. As of 2022, the annual limit is $61,000, or 25% of your total earnings.