How your bookkeeping can boost your tax deductions

Bookkeeping is the key way to bring one’s tax strategy in full circle. It’s the best way to know what is deductible and how to maximize your business deductions. Here is a checklist that make sure bookkeeping is maximizing travel, meals and entertainment deductions. Since these are the three ways where everyone doesn’t have restrictions to themselves. Everyone have to consider these 3 things as major constraints in bookkeeping in order to boost your tax deductions.

Get reimbursed for business expenses that you pay for personally.
Have you ever been to a restaurant that only takes cash? Or traveled in taxi that only accepts cash? Or have you misplaced your business credit card and had to use your personal credit card? These are just some examples where we have to pay our business expenses with personal funds. We could easily miss these expenses so keep an file handy and put all of your receipts in that file. So that you have got a handy report that you have spent from your personal fund.

Have separate account for code meals that are 50% deductible in order to keep them distinct from other expenses that are not subject to this 50% rule. Many times we could see just one meal account in the chart of accounts. The problem with this is that while meals are generally only 50% deductible, some meals are 100% deductible. The mistake that we see most often when reviewing a prospect's prior year tax return, is all meals are treated as only 50% deductible (because they are all coded to one account) and we don’t have any strategy to identify meals that are 100% deductible.

Always maintain your travel expenses separately from your meals and entertainment expenses. As business travel is 100% deductible so separate it out as part of your bookkeeping system. Otherwise, you will have to sort through that account at the end of the year, or worse, you may sometimes forget to sort through that account and everything in the account is treated as only 50% deductible!

Use a separate section in your online bookkeeping software to make notes about who, what, when, where, how much and the business purpose of your travel, meals and entertainment expenses. By proper bookkeeping it is easy to boost your tax deductions, particularly for travel, meals and entertainment. This is an area where deductions are regularly missed and not properly documented, but once you know the rules and use my system, you'll find more and more deductions.