Let’s face it, most tax tips are either really time consuming to understand or hard to implement. Here is one that isn’t. And, as an added bonus, it can help you get credit for your business later too.
When starting a new business, many entrepreneurs self-finance. That is, they pay for things out of their own pocket. There is nothing wrong with this per se, but it can cause some difficulties, usually with tracking expenses or income. Sure, you can go back through your bank records, but how do you know what is business and what is personal for that day you deposited your spouse’s paycheck (they have a corporate job — poor fool), and that $50 your friend finally paid you back, AND the check that small client you just did the one job for sent you?
This tip won’t help you with keeping your income records, but it can help with your expenses. First off, the IRS wants to make sure you aren’t deducting regular expenses as business expenses. For this reason, they look harder at small business tax returns, particularly those with Schedule C. Second, if you happen to forget to keep a receipt or jot down a note, you need a way to remind you and your accountant that this was a business expense.
The easy way to kill two birds with one stone? Use that second address field on order forms for your business name. For example, this morning I ordered two memory cards for me and my spouse (who is also my business partner on one of my ventures) for our phones. Why? Because I needed her to do a review of something I wrote up for a client (it was Legal-ish and she is an attorney), but she had trouble because the memory that came with the phone isn’t enough to hold all the stuff and download and edit and keep a copy, and etc., and hold the new stuff. Now, there could be some question to the IRS or my accountant about whether or not this was for personal use. I keep good records, but as an added form of proof, I put the business name on the shipping information. So, now despite using a personal credit card (and collecting more points, thank you very much), I have written proof that it was for the business.
(Another tip, only do this on the “Shipping Information” section, or your credit card company might deny the charge as part of its automated fraud protection)
As an added bonus, if I ever need credit from the supplier and I want it in my business’ name, I can refer them to all the orders I’ve made that have already been for the business. They’ll see the business name on all those orders in their own system. This won’t always work, but it can definitely help, especially if you’ve done a lot of business with them in the past.
There you go. Easiest thing you’ll have to do today.
