For most e-commerce business owners, tax season can bring a lot of stress and pressure. Even if you have all your ducks in a row, it can still be daunting. Nobody wants to attract the attention of the IRS, especially small business owners. With that being said, tax season doesn’t have to be that way. In fact there have been a lot of technological advances in recent years, that make keeping track for your expenses and revenue a breeze, which can allow you to take advantage of all of the wonderful deductions available for your e-commerce business. Here is how you can make the most out of your e-commerce business tax deductions.
Business Expenses You Can Write Off
When it comes to e-commerce business tax deductions there are a lot of business expenses you can write off. There are a lot of things that can qualify as a write off for your e-commerce business. Write offs are a great way to lower your tax bill, which helps increase your profits. Here are some common e-commerce business tax deductions that you can take advantage off:
Overhead Expenses – Overhead expenses pertaining to your business can qualify as an e-commerce business tax deduction. These expenses include a portion of your rent or mortgage, if you operate your business from a home office, which most e-commerce businesses do. The only caveat of this is the space must be exclusively used as your business headquarters. It must be a designated office space. And, since you operate your business out of your home a portion of your utilities and insurance premiums can also qualify as an e-commerce business tax deduction.
Shipping Costs – If you run an online store, then your business will incur shipping charges. Since, shipping charges are a necessary part of running an online store, they qualify as an e-commerce business tax deduction. Shipping charges cost more than just the postage. Shipping supplies like: boxes, envelopes, labels, packing material, tape, and printer ink add up over time.
Professional Expenses – If you outsource service to another professional, for example; you have your taxes prepared by a professional, you can deduct these expenses. This is known as the professional services deduction and can be applied to a variety of professional expenses.
Marketing and Advertising – Marketing and advertising expenses are a necessary part of growing your business, and therefore qualify as an e-commerce business tax deduction. This includes the cost of running online ads, subscription fees for apps that help you manage your online marketing, any printed media like business cards.
Website – A website is a key component of an e-commerce business. So, the costs associated with running a website provide another e-commerce business tax deduction. This includes: hosting fees, domain registration fees, and web design costs.
Deducting Business Expenses Do’s & Don’ts
E-commerce business tax deductions can really make a difference in your tax bill. Which is why many e-commerce businesses want to take advantage of them. However, it is important to be smart when it comes to your e-commerce business tax deductions. Here are some do’s and don’ts.
Do take advantage of all available e-commerce business tax deductions you qualify for.
Don’t take the deduction if it isn’t applicable to your business.
Do keep track of all expenses and revenues throughout the year with accounting software. This is the easiest way to stay organized and can make a huge difference when it comes time to file your taxes.
Don’t wait till the last minute to calculate expenses and revenues.
Do keep personal expenses and business expenses separate.
Don’t mingle your personal monies with your business monies. This can make for an accounting nightmare.
Getting Good Advice & Finding A Professional For Tax Preparation
In addition to helping you find all of the e-commerce business tax deductions you qualify for, working with a professional tax preparer can help insure that your taxes will be file correctly and on time. If you conduct business in other states, you may be required to file sales tax in each of the states and jurisdictions where you have a nexus. A professional tax preparer will know the various tax rates, procedures, and laws associated with each state and jurisdiction you are required to file. In addition, if you have a payroll you will be my be subject to pay payroll taxes. A professional tax preparer can insure that this gets done correctly, so that you can avoid unnecessary and costly penalties. To learn more about e-commerce tax deductions or to schedule your free consultation call 1-650-999-0354.