For many company owners, filing taxes is a necessary part of conducting business. With tax codes constantly changing and more regulations being introduced, the idea of filing business taxes can be overwhelming. There are thousands of laws and requirements on tax filing, and the consequences can be hefty for under- or overestimating your taxable income. As a result, many businesses have to pay an accountant or other financial professional to help navigate the tax-filing season.
The most basic rule of thumb when it comes to business taxes is from the IRS itself. You need to be aware of your “necessary” and “ordinary” expenses. Based on information from the IRS, an ordinary expense is common in your trade or line of business. A necessary expense is helpful and appropriate for your trade or line of business. As a general rule, it must be both ordinary and necessary for an expense to qualify as tax-deductible. As an example, a plumber might deduct vehicle expenses when traveling from one job to the next. This would be an expense that would be ordinary and necessary for a plumber to incur.
While there are many examples of common business tax deductions such as payroll and travel expenses, there are some other deductible expenses that some business owners might not realize. From fees associated with credit card payments to office supplies, there are a few deductions that business owners might miss if they are preparing their taxes. Let’s take a look at a few business fees that could be tax-deductible.
Merchant Service Fees
If your business accepts credit cards for payments, you have no doubt experienced the fees associated with processing cards. From flat fees to per-transaction fees, numerous types of expenses come with collecting credit card payments. Depending on the type of credit card accepted, businesses could pay as much as 3.5 percent per transaction. However, merchant fees, also known as credit card processing fees, are considered ordinary and necessary expenses by the IRS and are tax-deductible. You’ll want to keep detailed records of the processing fee for each transaction so that you can total them up at the end of the year.
Service and Supply Fees
Throughout the year, there are many types of supplies that you will probably need to purchase to do business. Items such as printers, paper, pens, computers, and work-related software are eligible for tax deductions as long as they are used for business during the claim year. Many business owners often overlook postage and shipping fees. However, these items are also tax-deductible as long as they are business-related. It will be important to retain all receipts for office supply purchases for documentation.
If you have numerous employees, you might also have to mail tax information and W-2 forms at the beginning of each year. As a result, your might require that tax return envelopes be printed and created. Sometimes these kinds of envelopes are required to protect sensitive information and mail uniquely sized documents. If your office needs to purchase a special double window envelope or custom tax return envelopes, these expenses and printing fees are tax-deductible. Aside from general supplies and fees, the IRS sees any other specialty supply item or printing fee requirements as ordinary and necessary expenses.
In addition to the expenses mentioned, there are others that business owners fail to recognize. Some overlooked business expenses include association dues, bank service charges, business start-up costs, accountant fees, and commissions. While businesses have to navigate complex tax rules and regulations, the Internal Revenue Service can be pretty generous with expenses that are considered tax-deductible. With some time, research, and possible help from an accountant, you can find many deductions to help you get the largest tax benefit for your business.