The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: RusticBohemian on May 17, 2012, 10:10:55 AM
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Hey guys.
I've been running a small business for a few years now, but I need to get a better handle on the tax angle, because I know I'm leaving some cards on the table.
I'm wondering if there are any good books or other resources you've enjoyed for teaching you about maximizing business tax savings.
Suggestions?
Thanks.
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My uncle is an accountant and my dad ran his own business for many years so I've been spoiled with experienced advice (even though my small business is entirely different). What is your business specifically? I've only read a couple of books but there were very specific to my business which is independent music teaching.
I'm HORRIBLE with tracking my expenses so what I've done is I've created a 2012 Business Expenses folder in my gmail. When I order stuff online for my business, I move the email receipt into that folder. If I buy something in person, I scan the receipts and email them to myself to be put in that folder.
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I run a raw food website teaching people how to lose weight, overcome diseases, and become health. I do raw food coaching, sell books, etc.
One question I have is buying raw fruits and vegetables wholesale. Now, of course this food is for me to eat.
But I'm always testing recipes, etc, which has a business angle, so I wonder if I could justify those wholesale fruit and vegetable purchases
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Hmm... I'm inclined to think that you might be able to deduct some of those expenses, especially if you are experimenting on behalf of your business. I still take private lessons myself (long live continuing education!) and am able to deduct those expenses (including travel costs/mileage involved) because it is considered professional development. I am also able to deduct books and music that I buy for my own studies even though my students don't necessarily get use of them directly. I think the expenses you mentioned are definitely worth considering.
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Right. I guess the question is HOW MUCH can I deduct, not whether or not I can.
I mean, most of my grocery bill comes from fruit & veg wholesalers. I usually spend $100-$200 a week.
Now the food is going to feed me, but if I make a new recipe for myself, can I consider that a business expense?
I think I'm going to have to talk to an accountant on this one.
Hmm... I'm inclined to think that you might be able to deduct some of those expenses, especially if you are experimenting on behalf of your business. I still take private lessons myself (long live continuing education!) and am able to deduct those expenses (including travel costs/mileage involved) because it is considered professional development. I am also able to deduct books and music that I buy for my own studies even though my students don't necessarily get use of them directly. I think the expenses you mentioned are definitely worth considering.
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I run my own small business and keep seperate business accounts. That way, if something is a Biz expense, I pay for it out of that account and track it. A good book I use is the Small Business Tax book by Nolo. http://www.nolo.com/legal-encyclopedia/small-business-tax-faq-29131.html
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Taylor, thanks for the suggestion.
Question for you or anyone else:
I'm actually looking for a good business credit card with no annual fee and good airline flyer mile redemption program.
Any suggestions?
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There are a few really nice options on the MMM Credit Card page here (http://www.mrmoneymustache.com/credit-cards/).
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I guess I should clarify and I have business checking acocunts and a business debit card. I don't have a business credit card since I can cover my overhead right now with the revenue, but I would also look at what MMM recommends for business credit cards. You can also get one through the bank you use for your business accounts (I use First Bank in Colorado for my biz accounts and have been pleased so far).
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The simple answer is that you can deduct anything which helps you in your business. Yes, you can deduct "research." What you are having trouble with is deciding what that research costs you, because you make bulk purchases that you use for both personal and business research. In order to make accounting easier you need to set aside ingredients for "research." This way you have a pantry for personal use and one for work. If you move things between the two pantries then treat it like a purchase or a return. That's the only way to make it accountable. Otherwise you are just guessing.
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The key to deduction is documentation.
Whatever system you use, and there are many that work, you just need to make sure everything is written down in a way that you can use to later show how it was used for business.
For me it was a simple ledger that worked. Throughout the year I noted every business expense or business event in chronological order. Then at tax time I figured out what all that meant. But my business was fairly simply with larger and infrequent individual events to keep track of. For you it might need to be more complex and organized. Even just a simple spreadsheet can be used to keep track off all expenditures.
Turbo Tax worked very well for entering the deductions themselves, made it very simple. Just add them all up and put them in the correct category when doing taxes.