Small Business Taxes: Understanding the Commonly Overlooked Deductions

Numerous small business owners lose significant amounts of money during tax time. These losses can be attributed to overlooking some critical tax deductions. For instance, many traders ignore some deductions which are not well-known and others which have been made available recently. If you would like to remain competitive in your field and maintain healthy cash flow, you should be cautious not to miss out on these benefits. Here are some of the commonly forgotten tax deductions that you should consider when filing your returns.

Banking Expenses

In general, most people will remember prominent banking and accounting tax deductions, including bookkeeping service charges, business activity preparation costs and general marketing expenses. However, there are some critical deductions which are often forgotten and could improve your bottom line. For example, you should remember to include the banking fees linked to your account. Also, the interests on your overdrafts and loans and franchising fees which are not included in the initial purchase can be deducted.

Prepaid Charges

In the recent years, more businesses are choosing to prepay their everyday expenses. This practice enhances the convenience of managing some of your business service charges. Also, this payment option might allow you to gain some tax deduction benefits. You should check your local legislation for the specifics on the applicable deduction on prepaid business charges. Some of the standard company services that you can prepay are Internet, insurance, leases and travel expenses.

Business Stock

You can gain some financial benefits by taking advantage of the smallest deductions on your business taxes. Therefore, when filing your returns, you should take some time to check your stock and inventory. If you have damaged or obsolete stock in your business, you can write it off or write it down for optimal benefits. You can increase your profit margin by performing this task. Also, there might be an applicable deduction if the value of the opening stock is higher than that the closing stock.

Employee Deductions 

Finally, you should consider the additional staff expenses which will arise at the end of your financial year. These charges might include wages, commissions, bonuses and salaries. These are deductible even if the payments will not have been made. These expenses count because the work for which you will be accounting will have been done, though the employees will not have received their cash.

Managing your business tax deductions can be a complicated process. Therefore, you should consult an experienced accounting firm to handle your small business tax returns.