9 Often Overlooked Tax Claims for Businesses

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Do you get to tax season and wonder what tax savings you may have missed? As a business owner, you know you must meet… Scroll down to keep reading.
Tax Claims

Do you get to tax season and wonder what tax savings you may have missed? As a business owner, you know you must meet your tax obligations but may also want to explore every avenue for potential savings.

Let’s uncover nine commonly overlooked tax claims that can significantly contribute to your business’s financial health.

What are tax claims?

Tax claims, often called tax deductions, are expenses businesses can subtract from their total income, reducing their taxable income. Unlike tax credits, which directly reduce the amount of taxes owed, tax claims decrease the portion of income subject to taxation.

There are many common tax deductions, but there are also several that are often missed. Find out what these are below and how you can leverage them.

1. Car Expenses

What is it?
Business-related car expenses are for those who use a vehicle for work purposes. Expenses include maintenance, insurance, fuel registration, and license fees. Businesses can deduct expenses related to the business use of personal vehicles, either through the standard mileage rate or actual expenses such as gas, maintenance, and insurance.

Why is it overlooked?
Business owners may need to account for the full extent of car-related expenses that can be claimed, leading to missed opportunities for tax savings.

2. Research & Development Costs

What is it?
Deductions or credits are available for businesses engaged in research and development activities, fostering innovation and savings. These costs encompass expenses related to the investigation, experimentation, and development of new products, processes, or services. Businesses often incur these costs as part of their efforts to innovate and stay competitive in the market.

Why is it overlooked?
Businesses might only believe that only high-tech industries or large corporations qualify for research cost deductions. However, these deductions are available to any business.

3. Startup Costs

What is it?
The initial costs of establishing a business can be deductible, providing relief during the challenging early phases.

Why is it overlooked?
Business owners may need to know that the expenses incurred during the startup phase can be deducted.

4. Petty Cash Expenses

What is it?
Petty cash expenses involve recording small office expenditures, a practice that can lead to sizable tax savings over time. Some examples include office supplies, refreshments, business meals, and local transport.

Why is it overlooked?
Businesses often need to pay more attention to tracking and documenting these expenses, assuming they won’t significantly impact them. However, they add up over time and can accumulate to a significant deduction.

5. Retirement Plan Contributions

What is it?
Contributions to retirement plans, such as SEP-IRAs or 401(k)s, are typically deductible and can help both the business and the individual save on taxes.

Why is it overlooked?
Retirement plan contributions are often overlooked because they are viewed as a benefit primarily for employees. Small business owners, especially in startups or tight financial situations, may prioritize other immediate expenses over contributions to retirement plans.

6. Section 179 Depreciation

What is it?
Rather than standard depreciation, Section 179 deductions accelerate the depreciation of certain business assets, including equipment and machinery.

Why is it overlooked?
Section 179 depreciation is sometimes overlooked because businesses might be unaware of this tax provision or may not fully understand how it works. Small businesses, in particular, might focus more on day-to-day operations than on tax planning strategies.

7. Employee Benefits

What is it?
In your business, you can deduct the cost of providing certain employee benefits, such as education assistance, parking, and transit passes.

Why is it overlooked?
Small businesses, especially those with limited resources, may overlook the importance of offering comprehensive employee benefits. The focus might be on meeting basic obligations, and the potential benefits of providing additional perks may be underestimated.

8. Bad Debt Deduction

What is it?
If your business accrues bad debts, you may be able to deduct those amounts as a business expense.

Why is it overlooked?
The bad debt deduction is often overlooked because businesses may not prioritize tracking or addressing unpaid invoices. There might be a misconception that only large, uncollectible amounts qualify for this deduction.

9. Miscellaneous Expenses

What is it?
Deduct various business-necessary expenses like website and bank fees as miscellaneous expenses, contributing to overall tax savings. Other Examples include legal fees, employee recognition, and donations or sponsorships.

Why is it overlooked?
Businesses might overlook miscellaneous expenses, assuming they are too minor to warrant attention.

How to claim these deductions?

To be able to claim the above expenses, ensure you keep receipts, invoices, logs, documents, and a detailed record of all your expenses. Consult with your tax professional to maximize your deductions to ensure you take advantage of these commonly missed expenses.

At Tavola Group, we offer various services and are committed to helping you succeed. Contact us today to maximize your tax claims this season.

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