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Many small and midsize businesses get hassled from the time of tax filing season. Many times the business owners are troubled by the amount of taxes they have to pay, along with the expenses that were made for the development of the business and maintenance of machinery in the business. The general thought of any business owner is to save enough from the business transactions that allow them to have financial freedom even after filing the taxes. This is the reason why you should know about the tax deductions that your business is liable to. There are many transactions and purchases that are not supposed to be listed in the tax filings. These expenses are done to run your business with all the machinery and manpower you need. So the business owners must take care that they note down every tax business deduction they can make by law to protect their capital for business operations and development. Such expenses are not considered in the tax reports of a firm. So what are the top business deductions that you can make from your tax filing?
1) Car and Truck Expenses
Almost all businesses have to get raw materials, goods or workers in and out of the workplace or factory. The cost applied in the use of vehicles and gas used for the business as a mode of transport can be deducted from the taxes you pay. Since vehicles used for the transit of raw material or delivery of goods to customers are taken as capital invested in business operations. If you bought a vehicle in a financial year, a percentage of the cost of the vehicle is deducted from the taxes. The amount of gasoline used in the vehicles used by a business can also be deducted from the taxable amount. Apart from this, even if a firm lease a vehicle for certain tasks and deliveries at hand, the cost of transportation can be taken out of the business deductions.
2) Salaries and Wages
When you’re running a business that requires the use of manpower. The salaries and wages that you pay to the employees are not supposed to note in the tax filings. All the payments made to your employees like salaries, incentives, bonuses, commissions and retirement funds can be deducted from the tax. Although the payments that you make to the sole proprietors and business partners are not under the business expenses bracket so you cannot be in your business deductions account.
3) Contractual Labour
Many businesses use freelancers and contractual labour to get some of their work done. The salaries or wages that you pay to the labourers or workers. There has to be some paperwork from the contractor that shows proof of you hiring labour on a contractual basis.
4) Workplace Supplies
The supplies used in operating business every day is a deductible cost. Cleaning supplies, toilet supplies, postage stamps, office stationery, vacuum-cleaning cost, etc. are all deductible from taxes.
This is the most important business deduction from the taxes you pay. Depreciation is an amount deducted from the accounts of machinery, property and other such assets that depreciate in value with time. A piece of machinery in a small factory, for example, is used every day and the parts of the machine go through wear and tear. So when the machine is sold out to attain capital for new machinery, the cost for the machinery won’t be the same as it was bought for. So the depreciation in value of assets and business property can be deducted from taxes as they are business expenses.
6) Rent on Business Property
If your small business uses a place on rent for everyday operations, the rent on the property can be fully deducted from your taxes. Many businesses like boutiques, salons, spas, etc. use the rental property. The yearly rent on the property is paid out of the profit which makes it a business deduction.
The everyday operational activities of a small business or a midsize business require utilities that are charged for by the authorities. Electricity, for example, is fully deductible in the taxes. Another business deduction that can be deducted from the taxes is mobile phone bills used by you or you or your staff for the business. If you have a landline for domestic use you cannot deduct the bill from the tax but in the case of a second line for business use, it can be deducted as business expenses.
8) Other Taxes
Other taxes, like personal taxes that are not income tax or small business taxes, can be deducted from the tax filing list. Licensing and regulatory fees along with taxes on a property in the name of the business are tax-deductible. Your employer taxes and state unemployment taxes are deductible from taxation. Self-employed business owners, however, cannot benefit from tax deduction from half of their self-employment tax. It is a gross deduction on your income tax returns.
Insurances are another important business deduction that you can make from your taxes and save significant amounts from your taxes. All kinds of business insurances like, malpractice coverage, flood insurance, cyber liability insurance, business continuation insurance, and the owners' insurance cover is counted under business deductions. A small business may also claim a deduction of 50% of the health coverages for employees if you provide one.
Common repair jobs in the office building or manufacturing plants are deductible from taxes. Although the depreciation value of the machinery and other assets are accounted for in the business deductions, urgent repairs that might sometimes become fatal accidents can be deducted.
Business owners or staff might require time to time travelling for a meeting with clients or for checking a machinery unit that they have sold. If you or your staff travel out of the state for business, transportation, flight expenses and accommodation are fully deductible from taxes. Although the local commute is non-deductible.
Understanding the rules of tax accounting can be a tough knot, at ATS Accounting we take care of all your tax filing paperwork and tax deduction accounting.
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We all love the numbers that get added to our bank accounts every month or every week. If not the numbers, we love the payroll cheques that we receive regularly. As a worker, the payroll matters a lot. But what happens if you can't pay your employees well or there are some issues with your payroll system? Your employees may end up feeling negative in several ways. They may also be demotivated to work. To avoid these issues, you must ensure that you don't make any mistakes when it comes to your payroll system. Make your payroll system a perfect one by avoiding the following mistakes.
The inconsistencies can be anything, right from improper salary payouts to managing garnishment requirements. Whether your company is new or well established, it’s important to be consistent with your payment schedule. The most common schedules are either weekly or biweekly, but some companies choose to pay their employees semi-monthly or monthly. Based on whatever your organization's policies are, make sure you pay your employees on time, every month. Don't let people ask you or the finance department several times to follow up on their money. If you fail to do this, be ready to face the bitter behaviour and attitude of your employees. And you won't be able to blame then for anything then.
Not Staying Current
Sometimes, the issue may not be with your internal payroll system. You need to stay in line with the latest laws, rules, and regulations around payroll system in your area to ensure that you don't end up in any problems. Payroll laws and regulations are an ever-changing landscape. It’s important to be aware of new laws that are passed to ensure your company is maintaining compliance. When you miss a new law, you stand to lose invaluable time trying to amend any payments you have made using the previous law or rule. You can ensure compliance by creating a calendar that reminds you to check for updates to all relevant laws. And of course, if your employees find this out, they'll be upset with you and may even sue you for the same.
If your employees are working extra for you, make sure you acknowledge them. That's where the overtime incentives come into the picture. Specific guidelines must be followed when determining overtime pay and miscalculations can be costly. Employee litigation has been a rising trend in recent years where employees have claimed to be misclassified and treated as "exempt" employees and therefore not entitled to overtime. When tracking work hours through our time and attendance platform all hours (including overtime) are recorded and collected on organized time sheets that make calculating hours simple. And with this also, respect your payroll system's calendar. Pay your employees for the overtime in the current month at the end of this month and not after a quadrant. Skipping
When your employees work for you, they are eligible for various benefits and incentives. These benefits vary from organization to organization. However, some basic offers are established by the government that every organization and employer needs to respect. If your employees work better than they are expected to, you have to reward them rightly. And when you do, you need to maintain the right records so that the books of accounts look properly managed.
This is one of the biggest mistakes. Confusing two or more names and paying those people inappropriately is nothing but a blunder. This may happen even more when you have two or more people will have the same or similar names. Moreover, if you recently appointed a new person to look after the payroll system, there are higher chances that they may end up making this mistake. No matter what the scenario is, this mistake should be avoided. When a person is paid incorrectly, it sends out a wrong impression to your employees that your payroll system isn't efficient that you end up making such silly yet massive mistakes. Therefore, be very careful with what you do. When you maintain accurate records, this mistake will likely not happen.
Another way to avoid any errors in your payroll system is by outsourcing the job to a reputed company. A company like ATS Accounting can help you manage your work while we take away the hectic tasks of payroll calculation, incentive and other benefits addition, and salary payment. So give us a call today to find out how we can take away your worries.