Frequently Missed Deductions

Many taxpayers get a knot in their stomach when it’s time to start working on taxes. It’s a task that very few enjoy. (Those who do are probably accountants!) 

Much of the fear at tax time is caused by being unsure that you’re figuring taxes and filling out the forms correctly. But a significant amount of fear also has to do with worrying about how much you’ll owe.

Reducing the Fear

Itemizing deductions can help you reduce your tax liability come time to pay up. Staying on top of expenses can be a tedious process of collecting receipts, categorizing expenses, and totaling columns of numbers. Some people find itemizing deductions too time-consuming or complicated. That’s too bad. They’re probably paying more in taxes than they should. 

Most Frequently Overlooked Deductions

The IRS continuously updates the tax code, making it challenging for taxpayers to keep up. Changes often favor taxpayers, but you miss out on the benefits unless you’re in the know.

It’s never too early to start planning for tax time. Using the right mindset as you move through the year, you can collect receipts and record expenses as you go. That way, when it’s tax prep time, you have everything you need to back up your write-offs.

Deductions for Individuals and the Self-Employed

Following are some of the most commonly overlooked deductions for individuals and small businesses. Keep them in mind in case they apply to your situation.

Lifetime learning. You don’t have to be working on a college degree to qualify for a tax break. If you’re taking undergraduate or graduate classes, continuing education classes, or certification programs at an eligible educational institution, you may be eligible to claim part of your education expenses as a deduction. Qualified expenses include tuition, fees, books and other course materials, and computers or software required for the course.

Retirement savings. The saver’s tax credit is often overlooked and applies to those who contribute to a qualified 401(k), 403(b), traditional or Roth IRA, or other qualified retirement plan. You’re probably already getting a break on some of this if you’re using pre-tax dollars to fund your retirement contributions. But you may qualify for this bonus credit if you meet the requirements.

HSA contributions. If you’re self-employed and obtain health insurance on your own, you may also want to set up an HSA. Contributions to this HSA are tax deductible, depending on age and family status. Since the contributions help lower your taxable income, they may also help you qualify for better insurance rates.

Deductions for Businesses

Here are just a few of the deductions overlooked by small businesses. 

Petty cash expenses. Although cash is nearly out of vogue, some businesses still use petty cash. While the purchases made with petty cash are small, they add up during the year. Petty cash expenditures are tax deductible — if you have good records to back them up. Tracking all these little expenditures is tedious but usually worth the effort.

Business start-up costs. Starting a new business is an achievement rewarded with tax write-offs for qualified expenses incurred in starting the business. The IRS separates start-up and organization costs, but both may be deductible up to specified limits. Don’t forget to include travel expenses if you’re opening a business in a remote location.

Research and development. Research and development costs may also be deductible, either through a tax deduction or amortization. R&D is considered activity that improves the overall quality of the business, leading to better product development and increased revenues.

Call Adams Accounting Solutions to Maximize Your Deductions

For the sake of your business, it’s a good idea to have a trusted accountant on the team who can guide you through the tax preparation process and help ensure that you don’t miss out on eligible write-offs. 

Adams Accounting Solutions brings the knowledge and expertise you need to the team, whether you’re an individual taxpayer, a self-employed worker, or a small business owner. We can guide you to the tax deductions you qualify for that make the most sense for your situation. 

Drop by the office or give us a call today to schedule a consultation. We look forward to meeting you!