The No. 1 tax expense you're forgetting to claim
Most businesses do not own a vehicle or a fleet of vehicles. That's why the expense that is most overlooked by business owners is the cost associated with the use of personal vehicles for the business.
Many owners believe the use of a mileage log is burdensome. That may be, but you're leaving money, perhaps thousands of dollars a year, on the table if you fail to track these expenses. Here are some tips to help you get started:
Most of us are creatures of habit and travel to the same places, shop at the same stores, go to the same bank, etc. If you drove 100 miles on business errands, your expense write-off is $57.50 for 2015 and $56 for 2014. This can be significant, as mileage accumulates quickly. To simplify tracking of these routine trips, make a list of mileage from your business to your bank, post office, office supply stores, grocery stores, business association meeting locations, franchise meetings, etc. That way, all you have to do is track where you went, and you can calculate the mileage afterward.
Today you also have a choice of apps to make tracking mileage easier. These are especially helpful if you aren't good at keeping a traditional mileage log in your car. Whatever way you choose to track, your mileage 'master log' needs to be updated as your travels change and locations change. This master log will also help you keep track of other expenses you incur while traveling to those common locations using your personal vehicle.
Related: Important tax dates to know.
If paying tolls with cash, request a receipt. If paying tolls with an E-ZPass, provide a copy of your monthly statement to the bookkeeper. Parking expenses, depending on where you live, can be expensive. Parking can be paid with cash or credit cards in most instances. Even parking meters in some locations will accept a credit card. If parking on business, pay with a business credit card or request a receipt if paying with cash. If paying into a meter that only takes cash and provides no receipt, create some type of voucher system for recording this cash payment.
Many business owners put vehicle expenses way down on their list of things demanding their valuable time. But I say this time in tracking is time well spent. You will be surprised how a little time now can save you hundreds or thousands of dollars at tax time.
Once you track these expenses, you can handle them in a few different ways as the owner. The expenses can be booked as owner contributions to the business, or the owner can set up a system in writing to be reimbursed for these expenses.
Reimbursement can be handled as the expenses occur, monthly, or even annually. Remember, diligent tracking will save you dollars.
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