How To Capture The Opportunities To Reduce Your Taxes
Knowing how your daily activities can reduce your taxes is a great start to actually reducing your taxes
. Once you've done this, it's time to make sure the opportunities you've identified actually reduce your taxes and the best way to do this is with your bookkeeping.
Bookkeeping is a fantastic and powerful tool when it comes to reducing your taxes. Remember, our taxes are impacted any time we receive or pay money. Bookkeeping is where all this activity gets recorded so it is the ideal place to capture the opportunities and make reducing your taxes a reality.
Bookkeeping for travel expenses can be tricky but I have a few tips to help keep things simple.
The very first thing to do is to determine if your travel is business, personal or both.
Once you have determined if your travel is business, personal or both, you can capture it in your bookkeeping. Let's look at these 3 different categories in more detail.
#1 Business Travel Business travel is deductible. It is critical to capture all of your business travel expenses in your business bookkeeping - this is how it will ultimately be claimed on the business tax return and reduce your taxes.
The #1 tip I share with clients about business travel expenses is to have a credit card that is used only for business expenses and to use that card for their business travel expenses. Then, when the bookkeeping is done for the business, the credit card activity is simply part of the business bookkeeping. This greatly minimizes the risk of missing deductions and overpaying taxes!
Another important tip I share with clients when it comes to business travel expenses is to separate the specific travel expenses in the business bookkeeping. For example, have separate expense accounts for airfare, hotel, transportation and meals.
Why is separating travel expenses important? There are 2 primary reasons.
Reason #1 Meals are only 50% deductible so having a separate account for meals helps ensure the 50% limitation is applied only to the meals and not other expenses that are 100% deductible. This can have a big impact on reducing your taxes!
Reason #2 Travel expenses can add up. Having a single "travel" expense account means it could be a large number that stands out which can draw scrutiny from the IRS, particularly during an audit. Breaking out the expenses almost always makes the amounts more reasonable.
#2 Personal Travel Personal travel is not deductible. Bookkeeping can help prevent the filing of an inaccurate tax return by keeping your non-deductible personal travel expenses separate from your deductible business travel expenses.
Personal expenses belong in your personal bookkeeping. This means you should pay for personal expenses with a personal account, whether it's a credit card, bank account or some other account.
By keeping your personal expenses separate from your business expenses, you create a clear separation between the two and the IRS likes this a lot! When the IRS sees that you are clearly separating your business and personal expenses, they are less likely to scrutinize your books. This helps protect your tax savings!
If you don't already do bookkeeping for your personal finances, now is a great time to start because if you start now, you can be on track for 2010.
#3 Personal and Business Travel Some travel expenses may be business and personal, I refer to these as "mixed" expenses. This is where bookkeeping is extremely important!
Copyright (c) 2009 Tom Wheelwright
by: Tom Wheelwright
Credit Reporting Bureaus - What You Need To Know Maverick Money Maker Club - An Opinion Payday Loans Made Easy Squeezed Financially? Payday Loans May Be The Answer Maverick Money Makers Review - My Review and Personal Opinion About Maverick Money Makers Responsible Borrowing With Your Payday Loans What To Look For In A Face Cream Review Emergency Cash And Instant Loans Within Hours Of Application Reg Cure Application Review - Important Alert ! Debt Settlement- The Truth About Your Credit Card Bill BetRepublic.com NFL Playoff Preview How To Make Money On Ebay Numis Network – Is this a Profitable Legit Opportunity? Numis Network Review