Tax-related problems are always problematic, especially among small businesses. It has been documented; many small business owners consider the top 4 out of 10 issues tax-related. All other things are manageable in a small business, but you have to deal with your taxes, which is undoubtedly stressful. Apparently, you are more likely to wear many hats when you own a small business. But sadly, the last thing you have to do is give more of your hard-earned trade revenue to the government. Thanks to certified public accountants (CPAs) to analyze and use strategies to reduce your taxable liability can be reduced.
Yes, Tax Deduction is a thing here! And eCommerce accounting helps you find a way through! We are going to discuss all about tax deductions, stay tuned…
First things first…
What is eCommerce accounting?
Ecommerce accounting is basically collecting, analyzing, organizing, and reporting financial data assets related to business transactions and investments. Let go of the assumption that eCommerce accounting is as simple as traditional accounting; that’s not the case here; it is way more different. Also, ecommerce accounting is not just limited to bookkeeping; it goes beyond, as features financial intelligence. Ecommerce accounting helps you track your invoices, commissions, payments, and more.
The whole accounting procedure in eCommerce consists of three key categories: bookkeeping, reporting, and submitting tax returns. This helps the business stay on track, sustain it, and help make feature decisions.
You aren’t running your business right if your financial records are out of order. In eCommerce, it’s unattainable to handle accounts accurately, just like in any other industry. However, it has been recorded, 41% of small business owners manage their books and numbers without any external help. Good job, wheeler-dealers, a virtual high-five to you!
But here’s a deal;
What are your plans? We meant, as your eCommerce business proliferates, pretty obvious your finances will get more complex. Sales, returns, supplier expenses, banking payments, and all the in-and-out money movements will need to be managed. Not just this, all the numbers need to be appropriately categorized, scrutinized, and then apprised to the tax authorities; how will you do it all alone?
Of course, you can quickly get overwhelmed with all the financial records you are up against without proper accounting procedures in your business.
Moreover, compound this with an important fact that:
20% of business owners who considered themselves with high economic literacy are actually economically literate.
We don’t mean to demoralize you from doing your own accounting with that information. But the fact is, when it comes to deal business at a high level, you need eCommerce accounting, no matter what! When you neglect eCommerce accounting, your business becomes the host to many short-term and long-term problems. Tax ramifications are one of those biggest short-term problems. And being a small business owner, you have to avoid those, but how?
Tax Deduction!
Or tax write-off, we can say… It’s true; you can write that off; deductible expenses exist!
When you hear the word deduction, think subtraction; that’s exactly what it means. The tax deduction is a process where you simply subtract how much of your income is taxed and reduce how much you owe to the government.
Tax deduction refers to the claims made in order to reduce your taxable income arising from different assets and expenses. It is a sort of tax benefit which helps you save tax, but the amount of tax you can protect relies on the type of tax benefit you have claimed via your eCommerce accounting!
How do taxes impact small businesses?
For small businesses, taxes are a financial as well as an administrative hindrance that directly impacts the capacity to invest more in the business.
Here are the statistics;
- According to NFIBs, “Tax Survey 2021,” 77% of small business owners reported that federal business income taxes were burdensome.
- For 69% of the business people, payroll taxes were hard to endure.
- And 66% of them considered state & local income taxes a load.
- The survey also found that 64% of small business owners find it difficult to operate their businesses with federal business income taxes.
And in that case, the easiest way that leads to making profits in a small business is through tax deductions. Identifying all of your business expenses and finding tax-deductible ones is the key to rescuing yourself from the impacts of the tax.
Here’s an instance;
Do you know, charitable contributions are one of the topmost standard tax deductions. Really it is! You could “write off” the money you provided to charity and reduce your taxable income by the portion you gave to charity.
Suppose, if your income is $80,000, and you gave $1,000 as a donation to charity, you could claim that donation as a tax deduction, and you have to pay tax for $79,000 rather than $80,000.
As simple as that, maximize your deductions to minimize your taxations; Cha-ching!
Well, this is just a scratch; from retirement contributions to home mortgage claims, there are several tax deductions you can take advantage of. Tax deductions could be;
Your Business meals
You can commonly deduct 50% of qualifying food and drinks costs if eligible for the deduction.
All it requires is documentation of the outing, the amount of each expense, the date, and place of the meal, and the business relationship and purpose of the individual you dined with.
Promotions and Advertising
The expense of advertising and promotion in business is also 100 per cent deductible. This includes; business logos and cards, social media ad campaigns, website designs and launches, social media marketing campaigns, sponsoring an event.
Regardless, you cannot deduct payments spent on influence legislation, political campaigns, or events.
Moreover, there are numerous Tax deductions your eCommerce accounting expert might tell you like;
Business insurance, bank fees, business travel expenses, depreciation, education, legal and professional fees, rent and moving, and telephone and internet expenses.
The bottom line
ECommerce accounting experts really help you maximize your refund with their consultations. If you want to ensure maximum tax deductions, hire experts and a tax professional. We suggest you go for Free Cash Flow, an eCommerce accounting with years of experience and a team of experts behind them.
About The Author
Dan Taylor
Dan is responsible for content marketing and branding at GuestPostBlogging. He writes about topics related to startup naming, branding and entrepreneurship.
