Do you have a lot of medical bills that you pay on each month? Could those medical bills be deducted from your tax bill this year? I was helping my mother take care of all of her finances after my dad passed away. I didn't realize how many bills she had coming in each month for medical treatments that my dad had undergone months, even a year earlier. I started doing some research about medical bills and tax deductions. If you have medical bills, take a minute to read through this blog to gain some knowledge that can help you decide what you can do when tax time comes around.
Businesses survive and thrive when generating profits. Earning profits only sometimes involves increasing revenue and boosting sales. Cutting costs helps a company's bottom line, so it makes sense to reduce bills whenever possible. Taking the appropriate amount of legal deductions is one way a business owner can work towards maximizing cash flow. However, taking improper deductions — even by mistake — may prove more costly for an entrepreneur. So, avoiding making deduction mistakes with business tax returns becomes necessary.
Legal Deductions and Legitimate Expenses
Legal deductions spelled out under U.S. tax law allow a business to reduce its obligations. Since companies pay taxes on profits, costs associated with running a business may be deductible. So, if the business rents a large storage unit to store excess inventory or other items related to the venture's operations, the annual rental cost could be entirely tax deductible. A business owner can look at all business-related expenses and keep track of everything.
Methods of Keeping Track of Expenses
Maintaining a log of any and all expenses associated with the company could reduce the tax burden. Writing down every little payment might be cumbersome, but the steps may be worthwhile. Perhaps using one credit card for business purchases exclusively allows a business owner to review costs based on the monthly statements. Using that particular credit card to pay for everything from monthly rent to petty purchases helps with keeping an accurate tally of expenditures.
Log the Official Receipts
A comprehensive ledger of expenses does not prove whether the claimed deductions are legitimate. Receipts from the purchases would likely establish that the business owner did pay what they said he/she paid. If the IRS audits a return, the receipts could substantiate the claimed deductions.
Business Expenses Only
Business owners might find themselves in trouble if they claim business expenses for things purchased for personal use. Not all improper deductions are claimed deliberately, but that doesn't mean there won't be penalties for the errors. For example, claiming the entire monthly fee for a storage unit as a business expense when 1/3 of the interior that stores personal items might lead to trouble.
A Comprehensive Review
Business owners that perform a comprehensive internal audit of all business expenses might save themselves and their companies significant amounts of money. Performing a thorough review of all applicable tax laws that open the doors to legal tax deductions might work in an entrepreneur's favor. Contact a firm like Martinson & Carter CPAs, PA to learn more.
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