Fellow Schitt’s Creek fans are likely to immediately get the “it’s a write-off” reference - but if you aren’t that well-versed in this iconic show, what it comes down to is that one of the central characters thought that literally anything and everything he bought could be written off through his new business.
While it’s a nice, romantic notion, it’s a far cry from the truth. Write-offs allow businesses to claim losses against necessary purchases. Tax write-offs work similarly so businesses are able to write off certain expenses that reduce their overall taxable income.
So, What CAN I Write Off?
There are hundreds of write-offs available, especially for small businesses. The key to ensuring that you’re getting everything you possibly can out of your write-offs is to work with a quality bookkeeper (shameless plug) as well as a qualified accountant - if you need recommendations, just ask us! We’re always happy to help you.
Listing every possible write-off here would take up a lot of your time. Instead, we’ll cover some of the most common work-related write-offs that businesses need to know.
- Travel expenses - If you’re traveling for work, you’ll be able to write off a portion of your transportation, lodging, and meal expenses.
- Meals - Small businesses can write off up to 100% of meal expenses as long as they’re relevant to the business and meet all the criteria. The main thing to know is that the meal needs to take place in an actual restaurant, not be considered extravagant for the business that you’re conducting, as well as document the business purpose of the meeting, as well as attendees.
- Car use and mileage - We’ll dive a little deeper into this topic in a future blog because there’s a LOT to know about using your car for write-off expenses. In general, though, any work-related travel (but NOT regular commuting) using a personal vehicle can be written off as an expense.
- Office expenses - Supplies from computers to post-its are all potential write-offs. Additionally, your lease, the electric bill, phone bill, and internet can be written off as well. People who run their businesses from home may also be able to write off portions of all of these, though the rules do differ.
- Professional fees - This includes joining fees for memberships to organizations like the Chamber of Commerce, BAR Association, business leagues, and trade associations.
This is just the tip of the iceberg - if you have questions about other items that can be written off, please ask. Our job is to advise and we’re always happy to take a look or answer questions BEFORE you purchase something that may or may not be a write-off.
What Documentation Do I Need to Submit for Write-Offs?
The documentation varies depending on the category of the deduction. I know, that’s a non-answer. However, the most important thing that you can do is to KEEP. ALL. RECEIPTS! Note the time, date, what the purpose of the expense is, how much you paid, and anything else you can possibly think of.
You never want to plan for IF you’ll be audited - you always want to plan for when. Take pictures of all of your receipts directly after you receive them to avoid potentially losing them. It also helps that when you take pictures with your phone, it automatically notes the date and time for you.
If you’re a Hill Bookkeeping client, you can use AutoEntry to send us your receipts from anywhere, making it simple for us to reconcile your books at the end of the billing period - if you're not a current client, you can sign up and access our exclusive discount here
What Are Common Expenses That I Can’t Write Off?
Before you consider writing something off, ask yourself this question… is it a reguar expense incurred in the normal conduct of your business? Is it typical for your industry? Anytime you try to write something off and are missing the documentation to prove that it’s for your business or know good and well that it’s a personal expense, much like David, you run the risk of being called out by the IRS.
It always helps to ask first to be sure that you’re on the right track with tax deductions and write-offs. Questions? Let’s schedule a call!