Many small businesses in America are lean operations where people wear many hats and have little room for error.
Unfortunately, that frequently means small businesses are on their own when tax time comes around.
Things are especially difficult to navigate if you’re a new business owner who doesn’t have experience pushing paperwork to the Internal Revenue Service … and thus may not know what tax breaks you are eligible for.
But while every enterprise is different, there are a number of common tax breaks out there most businesses benefit from, no matter the field.
With that in mind, here are five helpful tax tips for small businesses owners looking for a little less stress and a little more relief from the IRS in their 2012 tax filing:
Legal and Consultancy Fees: The tax code is designed to provide breaks on fees that are seen as the cost of doing business. So, one of the many things a business can write off is tax preparation itself. Whether it’s your accountant doing your taxes or your lawyer drawing up a contract or an IT consultant upgrading your network, these expenses are often fully deductible. The only catch is that if expenses in 2012 relate to work that will bear fruit in future years, you must spread your deduction over the life of the benefit.
Marketing Expenses: Another wide category that falls under the cost of doing business is advertising and marketing. Generally, any effort you take to build your brand with customers and the community is tax deductible. That goes for printing business cards, purchasing signage or even sponsoring a local Little League team to get your logo on the jersey.
Bad Debt and Theft: One of the hardest things for a business is dealing with deadbeat customers or shoplifters. Thankfully, the IRS is willing to cut you a break when these things happen. The IRS doesn’t allow you to place a dollar amount on your time or labor, so some kinds of bad debt for services don’t apply. However, if someone walks off with something without paying, you can write off the price of the physical goods.
Loan Interest: Just as one of the most powerful deductions for personal tax returns is mortgage interest, one of the biggest breaks a business can get is on the interest and carrying charges used for loans and credit. Since many small businesses are lean and have unreliable cash flow, the use of credit is quite common. Of course, a $100,000 line of credit is also tempting for tax cheats to use on personal items so be sure to keep extensive records of what you used the cash for and how those expenses were purely business-oriented.
Networking: In many industries, it pays to have connections. As a result, there are many networking-related write-offs that you might want to pay attention to. These range from business gifts sent to clients, trade show attendance and dues for professional associations. Events that qualify as continuing education to maintain or improve your skills in the profession also count.
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.