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Business tax filing is perceived to be a cumbersome task for most business owners. However, filing tax returns can be a smoother process if business owners are aware of the deductions they can possibly claim when filing for their returns.
Here are a few most common tax deductions that can be claimed by business owners when filing for their tax returns. It’s imperative for business owners to have clarity pertaining to these deductions, and the manner in which these deductions can be claimed.
• Legal and Accounting Fees and Tax Preparation: The organization in hand can choose to hire and pay an attorney to take care of bookkeeping, and accounting related services. The hired resource can also be responsible for including tax related advice. The professional fees that are charged can be deducted from the tax returns.
• Advertising and Marketing Related Expenses: All marketing and advertising related expenses can be deducted when filing for taxes. Basically, all the costs that are associated to gain and gather clientele for the organization are allowed to be deducted from the returns.
• Electronic gadgets including computers, tablets and cell phones: All necessary reference material that is procured by the organization in order to ensure and enable smooth functioning of the business processes. However, it is rudimentary to ensure that these gadgets are for the sole use for the business, and nothing else.
• Cars and Trucks for Business related purposes: Expenses pertaining to cars and trucks that are used for business purposes are allowed to be deducted either by using the IRS Standard Mileage Rate, or by deducting actual expenses that are incurred.
• Insurance Expenses: Business related insurance can be deducted from tax returns, in addition to worker’s compensation insurance, life insurance for employees, as well as business interruption insurance.
• Interest on business debts: Small businesses with annual average gross receipts of $25 million or less for the past three years have the leverage of taking all interest expense deductions with no limit. However, for larger business, these conditions are a little different.
• Leasing an office, equipment or business vehicle: Lease expenses for office spaces are deductible equivalent to the expense that is incurred on the particular year.
• Employee Related Expenses: Employee-related costs can be claimed as deductions in the tax returns too, including wages and salaries, staff uniforms, and tools and equipment for the employees.
• Office supplies and office expenses: Business Expenses related to office supplies, and miscellaneous expenses can be deducted for business tax purposes, given that they are used during the year. Similarly, all expenses for running an office, like internet hosting fees, are deductible when filing for tax returns too.
Given the fact that IRS does allow several deductible expenses that can be claimed when filing for tax returns, it is critical for business owners to know and understand the limitations as well as qualifications associated with these deductions. It is preferred to do a thorough understanding of these expenses, in order to avoid audits and penalties by the IRS.