For small business owners, or startups in particular, tax breaks can be especially important for the financial health of running operations. This is because tax breaks can be an effective way of saving you money on certain expenses, which can make all the difference when you’re building up your brand. As you will be aware, costs can stack up quickly when you’re running a business, so any relief you can get in relation to this is certainly worthwhile. Essentially, tax breaks are deductions from your taxable income for necessary business expenses.
The importance of tax breaks is highlighted by the fact that you could improve your business’s cash flow through any deductions you are granted, while freeing up funds that you can then put back into the business. This could go towards the progression and growth of your venture.
Tax breaks can also mean that you’re less likely to experience money problems, such as debt or bankruptcy, as any little amount you can get back helps your business bank balance. The money you save could also be allocated to an emergency fund, serving as a financial safety net in case your business ever needs extra cash. The detrimental impact COVID-19 had on many businesses taught us to always expect the unexpected.
Want to find out more? Read on to discover some of the most commonly overlooked tax breaks, why they’re overlooked, and how you can make sure you’re making the most of each and every saving where possible.
Why Are Some Tax Breaks Overlooked?
One of the main reasons tax breaks are overlooked is due to a lack of awareness, as they aren’t widely advertised, so many entrepreneurs simply don’t know about all the tax breaks available to them. You have to put in the time to research what tax deductions you could be eligible to claim. Ultimately, tax breaks are designed to give you money back for expenses that you need to run your business, so this is something to always keep in mind.
Another reason business owners may miss out on certain tax breaks is the fact that rules and regulations can change without warning, so try to always keep up with these where possible. If you’re ever unsure, it’s best to double-check. On top of that, sometimes tax breaks can be more complex than others, with certain criteria that need to be fulfilled. This can mean that mistakes are made by businesses when it comes to reporting expenses, or they just don’t want to put the effort in to make a claim. Some may find the claims process too convoluted and long, or they may not have sufficient evidence to support the claim.
Commonly Overlooked Tax Breaks
You’re probably wondering what tax breaks you may have already overlooked, and which you can make sure you never miss in the future. Here are some commonly overlooked tax breaks for you to keep in consideration:
- Mobile Phones and Internet:
- If it’s used for your business, whether for corporate communication or work, you may be able to get tax breaks on the costs.
- Work Vehicles:
- Not only can you get deductions on work vehicles, but you can also claim expenses related to fuel, general repairs, maintenance, and insurance.
- Business Travel:
- Think about getting tax deductions for flights, accommodation, and meals during business trips.
- Startup Costs (Up to $5,000):
- Expenses incurred in building up your brand and setting up operations can be claimed back but they are capped at $5,000.
- Training Costs:
- Investmenting in employee development and education is highly valuable but usually it’s expensive – so claim tax breaks here when you can.
- Advertising and Promotion
- You believe in your business but how are you going to get customers through the door if they’ve never heard of you? Through marketing, which can often come at a cost.
- Employee Salaries
- As one of your largest expenses, make sure you’re not overlooking tax breaks when it comes to your staff wages.
- Office Rent and Running Costs
- Again, one of the more costly expenses on the list, any tax breaks you can get relating to your workspace can have a positive impact on your cash flow.
- Some Charitable Deductions
- Not only is giving to charity a wonderful thing to do, but you can also sometimes get tax deductions on what you donate. Look into the terms and conditions with this one though, as they can vary.
This list is just to give you more of an idea of what kind of expenses you can claim for, it’s not exhaustive, so if you’re ever unsure, then look into it further to make sure. As you can see though, there’s a multitude of different expenses that you can claim for, so make sure you keep records of all of your expenses, as you need these to get your tax deductions.
Ensuring You Don’t Miss Out on Tax Breaks
So, how can you ensure you never miss out on any tax breaks? We’ve mentioned it before, and we’ll mention it again: research, research, research. By being proactive and checking every time you make a business payment, think to yourself: “is this a necessary business expense?”. Then go to Google and search whether you can get tax relief on it if you’re unsure. Taking a moment to look this up could save you a significant amount of money in the long run.
That being said, you need to make sure that any source you’re getting information from is reliable and current. Either cross-check your information or try to stick to government or authoritative online resources that aren’t outdated.
If you have too many expenses, have a lot to juggle at work already, or you simply want a helping hand with your accounts, then consider speaking to qualified financial advisors or business gurus, as they should be able to give you valuable insight into tax breaks. If you haven’t already, you could even consider hiring an in-house bookkeeper or outsourcing your financial management to an accountant that can also offer useful financial guidance.
Accountancy software is another thing to consider, as this can identify potential tax deductions automatically, in relation to your expenses. Some money management business platforms will also be able to provide you with useful resources regarding this so that you’re more knowledgeable in this area. However, a lot of these tools aren’t free. If they can take some of the hassle out of the job for you though, it could be worth it. Explore your options.
Exploring any of these avenues could be beneficial to you, it just depends what stage your business is at and which route you think is most suitable to ensure that you’re always tax compliant and saving money on tax breaks where you can.
Claiming Tax Deductions
Once you’ve figured out what you can claim tax breaks on, you then need to make sure you’ve taken the right steps to claim this. You must always keep detailed financial records of each transaction coming in and out of your business, so that you keep on top of your cash flow. This also enables you to explain and justify why each expense qualifies for a tax deduction if you need to. It’s unlikely that you’d have to do this, but having the evidence there as back up, just in case, is always wise.
Typically, you submit your expenses information when you file for your tax return but these dates can vary depending on what kind of business you run. As an example, Sole Proprietorships have a different tax return deadline to business owners running a Partnership, so ensure you know when you need to submit yours by and what you need to include. You should ensure that you know exactly when your deadlines are and try to get everything sorted in advance so that you’re not stressing about it at the last possible moment. This is where having an accountant on hand or accountancy software can be very handy – they should help to ensure that you never miss a deadline.
Try to avoid any mistakes by keeping records as accurate as possible and by regularly checking your books to ensure there are no discrepancies and everything is running as it should. You should also never assume that you’ll be guaranteed a tax return, as claims can be rejected. One last thing: avoid claiming for personal expenses as business deductions, as this could cause problems and you’re unlikely to get a tax break.
Final Thoughts
Overlooking tax breaks can result in missed opportunities for savings that could significantly boost your business’s financial health. By always staying informed about the different deductions you can take advantage of, while ensuring you’re diligent in tracking and reporting expenses, you can maximize these opportunities to reduce your taxable income.
Using intuitive technology, like accounting software, and consulting with financial professionals can further ensure that you’re not making any mistakes. Ultimately, any eligible tax breaks you can get will provide essential support for your business, allowing you to reinvest savings and secure your company’s future growth.
