Financial Advice for the New Year
Another year also means another tax year, and as the old saying goes, the only thing you can count on in life is death and taxes. Since we can’t do anything about that first one, we decided to get some advice on the second one, after all, seeing your hard earned money fly away can feel pretty rotten.
Stay Up to Date
Tax laws, both federal and state, are continually changing, which means that items like mileage, meals, and other business expenses are all things that could be and probably will be changing in 2020. Also, make sure to stay up to date on all yearly expenses like tools, electricity, and vehicles, including registrations costs. For the maximum deduction, there’s no time like the present to get started on keeping track! If you’re not into computers, even a simple spreadsheet, or list of expenses will do the job.
For some, the issue of “what’s deductible” can literally be a million dollar question. The short answer, is almost everything can be, provided you do it “right,” and stay within reason. Use the expensive computer for work, not the cheap one. Have a business vehicle you enjoy. Most importantly, keep track of everything, so you have the records for later whether something is deductible or not. You can also take additional and more complex steps like opening an IRA. Investopedia has some good info on IRA basics here: https://www.investopedia.com/articles/retirement/06/iraandtaxes.asp. This of course, leads us directly into our next item of accounting, which is…
There’s a number of ways of decreasing the profit of your business in the form of expenses that can later be recouped, but outright cheating isn’t one of them. It may seem like a good idea to claim your ski boat as a deduction, but don’t do it! Once you start cheating, the IRS will go back and start digging, and you could end up losing, your business, house, marriage–everything you’ve worked for. Now that we’ve scared you, keep in mind that “advertising and entertainment” expenses go a long way. A trip to SEMA in Las Vegas might be on the agenda, or maybe a sled pull truck needs to be built to help promote your shop? If you do it right, it’s deductible. A change in the tax law in 2018 has stiffened these rules, but promotional events like dyno days or basic advertising is still tax deductible. For more info, check out a good article here: https://upcity.com/blog/turn-your-advertising-marketing-costs-into-tax-deductions/
Get a Person
If taxes make you a little dizzy, then it might be time to “get a person.” A tax professional can end up saving you in the long run, and can be anywhere from $250 to $1000 depending on how complex your taxes are. You can also choose to do it through a site like H&R Block, but you probably won’t get an experience tailored to your exact business needs. Even if you do your own taxes, having a relationship with an individual or tax office can be great if you have any questions you’re unsure about. Remember, running your business is your business, it’s ok to sometimes leave it to the pros.