- Most US taxpayers overpay their taxes.
- The basis IRS tax code has 2,600 pages, but it balloons to approximately 70,000 pages when you include the IRS regulations, revenue rulings and pertinent case law.
- You should always pay your tax bill.
- You should never pay a bill that isn’t yours to pay.
Here’s how it works.
Don’t just send your numbers to your CPA firm and wait to get your tax news. I’m involved in conversations with the owners and executives of early education companies most every day. Most every day I hear that these smart, successful people are not telling their CPAs about expenses that can be written-off on their company tax returns. Here are some of the most commonly missed.
1. Software / Subscriptions:
In some years, the IRS has allowed this item to be expensed in one year. In others, it has been allowed under Depreciation. If you are trying in increase the market value of your EEC, ask your CPA if it can be included in Depreciation. Part of increasing the market value of your EEC, is creating the highest EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) possible. Subscriptions to magazines can be deducted as well. It may not seem like a lot of money to worry about, but none of us drive down the street throwing $100 bills out the window. Tell your CPA. Keep the money.
2. Auto Expense:
You have three options here.
* Mileage—This is an easy one to skip, because nobody wants to keep up with it. However, the IRS allows write-offs for mileage, tolls and parking. The 2021 IRS mileage reimbursement rate is 56 cents per mile.
* If your company is leasing a car for you, you can deduct the lease payments.
* If your company is buying the car, you can deduct the interest on the car loan and depreciation on the vehicle.
3. Home Office:
The key to this one is that you must have a room or part of a room that is designated solely as your office. Your CPA should ask you what percentage of your home is “office space”. If, for example, your office equals 10% of the total square footage of your house, then your CPA should also write-off 10% of your rent or mortgage, insurance, utilities…etc.
Office-furniture purchases can be expensed or depreciated. Either way, it’s still better for you. Again, adding it to depreciation increases your EBITDA and helps to increase the market value of your EEC.
5. Office Supplies:
Most people remember the supplies purchased for the centers or schools, but not everyone keeps receipts for the supplies used at the home office. It’s easy to overlook these supplies because they are sometimes purchased in smaller quantities when you’re running personal errands. However, paper, pens, sticky notes add up over a year.
6. Office Equipment:
At work or in the home office, printers, copiers, computers, scanners, routers, fax machines, power strips are also tax deductible. Again, these items can be expensed in one year or depreciated over a few years…whatever is best for you.
7. Travel / Meals and Entertainment:
Hotel rooms travel (plains, trains and automobiles) and tips to your Uber or Lyft driver or the bellboy are all 100% deductible. Restaurant bills are 50% deductible.
Your EEC can pay for your health insurance, and it is 100% deductible. There are conditions here, but ask your CPA.
Remember, a dollar saved is the same as a dollar earned. You work really hard for your money. There is no reason to give it away after you’ve done that hardest part of the work.
Again, we hope it helps.
Best to you….Brad Barnett, President BFS®
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