Q. I just started my own small business, what do I need to do for record keeping?It seems like everyone is starting their own small business these days. Unfortunately, many people are not informed about what records they should be keeping for their business. In general, any money you spend for your business is deductible. Some of the more common items include advertising, vehicle expenses, insurance, office expenses, rent, travel expenses, meals and other expenses that are normal and reasonable for your type of business. The most important thing is to keep receipts or some other documentation to support all of your expenses.One of the more beneficial write-offs is mileage on your vehicle. Just like when you are an employee, normal commuting to and from your primary work location is not deductible. However, any other miles you put on your vehicle for business purposes are deductible. The key to using this write-off is keeping good records. The IRS pays close attention to businesses and their mileage deduction because it is something that is easily abused. In order to avoid problems and to win any questions by the IRS, keep a log in your vehicle and track the beginning and ending miles every time you use your vehicle for work. Also, include a date and brief explanation of your trip. You can simply put a notebook in your vehicle or there are several apps out there that you can put on your phone.Another topic that the IRS has been paying a lot more attention to in recent years is the home office deduction. Just because you use a portion of your house to do business does not necessarily mean you will qualify for the deduction. The two primary qualifications are that the area is used REGULARLY and EXCLUSIVELY for your business. Generally, it is easy to satisfy the regular use but the exclusive use might be more difficult. There are many other criteria and things to think about when it comes to taking the home office deduction, so please consult a tax professional before taking a deduction that might get questioned.If you want to make your life much easier when it comes time for taxes, use a spreadsheet or accounting software to track your expenses and summarize them at the end of each month and the end of the year. There are many great software programs available at reasonable costs. However, the software or spreadsheet is only as good as the user. If you have any questions, consult your tax professional and they should be able to point you in the right direction. Remember, any good tax professional should be available when you need them, and not just a few months out of the year.Jeremy N Kniffen, CPA is the owner/operator of Liberty Tax Service in Falcon, Colorado. To find the Liberty Tax office nearest you call 866-871-1040 or visit www.LibertyTax.com.
