What To Record To Get The Most Out Of Your Tax Deductions
If you are a small business owner, chances are good that tax preparation time can be especially stressful for you. You want to be able to claim as many deductions as you can, but you might make a mistake and not have the documentation to back it up should the IRS come. Here are some record-keeping tips to allow you to make sure that you have enough documentation for every deduction you take.
1. Keep a Binder in Your Car to Record Trips Made For Your Business
If you own a car and use it the majority of the time for your business, but some of the time for personal reasons, you are going to need to separate the amount of gas you used and insurance you paid so that you can deduct the percentage of your vehicle that was used for your small business. To do this, keep a binder in the car with a pre-made sheet that allows you to put in the time you started driving, the time you stopped driving, the mileage at start time, and the mileage at end time. Doing this will allow you to show that a certain percentage of your trips were for business and that you should be able to deduct that same percentage of the cost of your car, its maintenance, and its gas from your taxes.
2. Keep Track Of Your Receipts
Every time that you take a client out to lunch or buy staplers for the office, you should be able to deduct that cost. However, you can't deduct the cost if you can't prove that you made it in the first place. In order to justify your deductions, you are going to need to keep track of your receipts. There are many different applications out there that allow you to take a picture of your receipt with your phone's camera and have the app store the picture in the cloud. This allows you to recover your receipts without storing hundreds of pictures on your cellphone or if you lose your phone.
3. Look at Charitable Contributions
If you donated goods and they don't write the amount that you donated on the receipt, create a conservative estimate of the value that you donated and store that receipt in its own special file with the other receipts from charitable donations. If you donated money and went to a fancy donor dinner, you can deduct the amount of money that you gave the organization after subtracting your estimated value of the food that you ate. Keep the cancelled check for the donation, and put it in the same file. Use these records to be able to avoid paying the full amount of taxes.
For more information, talk to a company, like Jack Landis And Company, that specializes in tax preparation.