7 Business Tips

As the saying goes, “you don’t know what you don’t know”. Right? You could be making mistakes in your business because you just don’t know. And many times, it’s not because you didn’t know what to ask, you didn’t even know you should be asking.

1. Gifts

The IRS allows for a business to deduct the cost of purchasing a gift for a client, customer, vendor, etc. But like most IRS rules there are limits. The deductibility of a business gift is up to $25.00 a year, per person. If you pay $50 for a client gift, only $25 is deductible. I recommend you have two accounts on your chart of accounts to track the difference. One account labeled ‘gifts, deductible up to $25’ and a second account labeled ‘gifts, non-deductible portion’. One thing to keep in mind, incidental costs that do not add substantial value to the gift such as gift wrapping, mailing, or engraving, generally do not count towards the $25 cap.

2. Business Miles

If you are using the vehicle mileage deduction on your tax return make sure you are maximizing this deduction. Business miles include not only travel to clients and job sites, but also other business-related trips. Such as trips to the bank, post office, and office supply store. Make sure you are tracking all of these miles as the deductions can add up quickly.

3. Employee Bonus

If you have employees, all labor costs should be run through your payroll system. This applies regardless of hourly or salary. I see this done incorrectly a lot with bonus checks. Bonuses need to be run through the payroll system to deduct the proper taxes and so the bonus amount is included in the annual W2. For example, if you give an employee a bonus of $1000 in the form of cash or a non-payroll check, this amount will not be included on their W2. (The W2 is the form the employee uses to claim income on their tax return.) Whether intentional or not, failing to claim income on a tax return is referred to as tax evasion. Be sure you are following the law and process all forms of compensation through your payroll system.

4. Business Credit

One of the best ways to build credit for your small business is through a business credit card. If you have expenses in your business (and let’s face it, who doesn’t) and are good at managing debt then this might be a good route to build a credit history in your business. If you are currently using a personal credit card for business expenses then you should definitely check into getting a business card. And while you’re at it, stop using that personal card for business. It’s never a good idea to commingle business and personal funds and if you have formed a legal entity (such as an LLC or corporation) the IRS has rules against doing so.

5. Collect W9's

If you pay for professional services to individuals that are not your employees, chances are they are considered Independent Contractors by the IRS. You might be aware that these individuals or businesses must receive a 1099 each January if their annual payment meets or exceeds the threshold, which is currently at $600. But you might not know that you should have them complete a W9 before you issue their first payment. This is an important step that many business owners miss. A W9 is an information form; it collects information from the service provider. If you collect this form ahead of time it guarantees you will have the proper information needed for the 1099. And trust me, processing 1099’s in January will be a much smoother process! (You can find a W9 form on the IRS site or by doing a quick online search.)

6. Barter

Bartering is the trading of one product or service for another. Often there is no exchange of cash. Small businesses sometimes barter to get products or services they need. For example, a handyman might trade office repair work with an accountant for tax services. Sounds great and super easy, right? Well, not so fast! If you barter, you should know that the value of products or services from bartering is taxable income. Thus the IRS requires reporting of the transaction on your tax return. For more details on this topic check out the blog post specifically on bartering.

7. Credit Card Surcharge

A credit card surcharge is when a business charges a customer more to pay with a credit card. I am sure you have seen it before and you might even do it. But hang on! This tactic to recoup credit card costs is currently prohibited in ten states. If you charge customers more to use a credit card, be sure to do your research to make sure you are within the law to do so.

Did any of these tips surprise you? Let us know in the comments. And for more tips and strategies for running a business be sure to check out our Business GUIDE! You can get all the details here!

~ Brandon & Christi are successful business owners who enjoy traveling and making a mess in the kitchen with their two daughters.

The article is for informational purposes only and should not be construed as business, accounting, tax or legal advice. Details are subject to change without notice.