As entrepreneurs close one year, many use the opportunity to set themselves up for success in the following year. One way to do this is to start looking at maximizing tax opportunities at the end of the year. Some of the top tax write-offs for self-employed people and business owners, according to TurboTax, are IRAs, home-office use, and educational expenses. Work-related memberships, such as to a state or national organization, are also common write-offs for many entrepreneurs.
“I get my court reporting machine serviced before the end of the year, and as a company, we pay our tax bill before the year turns, top off our office supplies, and reorder tchotchkes in our marketing closet,” says Debbie Dusseljee, RPR, CRC, reporter and owner of CompuScripts, located in Columbia, S.C.
Kathy A. Cortopassi, RMR, CRR, CRC, of Crown Point, Ind., had a long list for the end of the year, partly because she’s finding more reporting work even as she continues working as a CART captioner. Her list includes a new laser printer, a scanner, a new lightweight screen for CART, an LED display sign, and a few more iPads for realtime. She also mentioned that she bought a new machine at the NCRA Convention & Expo this past year, which will be part of her tax deductions. When asked why, she responded: “All the kids are gone, which means I don’t have those deductions anymore, so I have more room for deductions — er, toys!”
“I purchased a new scanner/photocopier/printer — it does everything but fly — and we will be purchasing a new telephone system by the end of the year,” says Jan Schmitt, RPR, of Schmitt Reporting & Video in Vancouver, Wash. “We also pay all bills and taxes and attempt to liquidate the checking account.”
“Our server is five years old so we are upgrading to the next level to handle our predicted growth pattern,” says Christine Phipps, RPR, a firm owner based in North Palm Beach, Fla., and an NCRA Director. “We also pay all outstanding invoices, in addition to rents due in January.”
Tax deductions don’t always come in the form of buying office supplies and equipment. For example, Robin Nodland, RDR, CRR, a principal in LNS Court Reporting based in Portland, Ore., says: “We give a sizeable donation to Oregon Lawyers against Hunger, which works in cooperation with the Oregon Food Bank. This is a wonderful way to recognize our clients, many of whom are on the board of this organization, and also make a donation to a worthy cause in our state. It’s a win-win.”
Schmitt mentioned that her company picks out a different charitable group each year. Michael Pace, CEO and president of Argen Blando Court Reporting & Video in Denver, Colo., mentioned that his company plans to give to both Justice and Mercy Legal Aid Clinic and Dolls for Daughters this year. Many charitable contributions can qualify as tax deductions against a business’s annual tax liability.
Pace suggested an article on charitable contributions from the Small Business Administration for those considering making donations.
Since each person’s personal and business situation is unique, it’s important to remember to assess the each individual’s personal situation.
“In all cases, seek the counsel of your tax advisor before making an important decision regarding taxes,” says NCRA CEO Mike Nelson, CAE. “If you do not have someone to provide guidance to you, consider consulting an Enrolled Agent. They are federally licensed tax experts who specialize in tax matters.”