INTERNET MARKETING

INTERNET MARKETING

INTERNET MARKETING

 

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ORGANIZE & CATEGORIZE EXPENSES

 

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Why Organize & Categorize Your Expenses

Categorizing your expenses is not only key to transition to a smooth tax preparation process, but it is also essential for how the IRS looks at your tax information.

The IRS want you to categorize your expense for the following reasons:
- some expenses qualify for full deduction while others only get a partial deduction
- certain categories get close scrutiny to see if they are unusually high

By organizing your expenses early on, whether you're using an Excel spreadsheet or an accounting software such as Quickbooks, your tax preparation and submission will be less painstaking and you will meet the IRS requirements to get your submission accepted.

Also see:
- Download Business Expense Matrix
- Accounting Software

Small Business Tax References:
- IRS Tax Guide for Small Businesses
- Small Business & Self-Employed Tax Center

Expense Categories

Automobile:
According to the IRS if you use your car in your business, you can deduct car expenses.  If you use your car for both business and personal use, you must divide your expenses based on actual mileage.  Visit the IRS website to learn more about Car Expenses.
   - Fuel
   - Maintenance
   - Keep Track of Vehicle Mileage

 

Cost of Goods Sold:
The cost of goods sold includes raw materials, freight, storage, direct labor cost, factory overhead, etc.  According to the IRS if you include an expense in the cot of goods sold, you cannot deduct it again as a business expense.  Visit the IRS website to learn more about the Cost of Goods Sold.

 

Depletion:
This is for businesses involved in minning, quarrying, cutting timber or drilling for fuel (natural resources).  You get a deduction for the amount of a product's reserve that are reduced.  Visit the IRS website to learn more about Depletion expenses.

 

Depreciation:
This includes, computers, copiers, machinery, furniture, etc. According to the IRS if property you acquire to use in your business is expected to last more than 1 year, you generally cannot deduct the entire cost as a business expense in the year you acquire it. You must spread the cost over more than 1 tax year and deduct part of it each year on Schedule C. This method of deducting the cost of business property is called depreciation. Visit the IRS website tolearn more about Depreciation expenses.  Also, see depreciation calculation explanation from WikiHow.

 

Employee Pay:
This includes all wages paid to employees for services performed (awards, bonuses, sick pay, vacation pay, etc..  According to the IRS you cannot deduct your own salary or any personal withdrawals you make from your business. As a sole proprietor, you are not an employee of the business.  Visit the IRS website to learn more about the Employee Pay expense.

 

Interest:
This includes mortgage interest and interest on business loans.  If a loan is part business and part personal, you must divide the interest between the personal part and the business part.  Visit the IRS website to learn more about the Interest expense.

 

Insurance:
This includes fire, theft, flood, car, liability, malpractice, workers compensation, unemployment insurance, life insurance, medical, business interruptions, etc.  Visit the IRS website to learn more about the Insurance expense.

 

Legal & Professional Fees:
This includes Legal, Consulting Fees, Sales commission, accounting, tax preparation, etc.  Visit the IRS website to learn more about the Legal & Professsional Fees expense.

 

Pension Plans Expenses:
The IRS allows you to deduct contributions you make to employee pension plans or pension plans for yourself.  Visit the IRS website to learn more about the Pension Plans expense.

 

Rent:
According to the IRS if you your home and use part of it as your place of business, you may be able to deduct the rent you pay for that part.  Visit the IRS website to learn more about the Rent expense.  Learn more about business use of yor home.

 

Startup Cost:
These are cost that are incurred before the end of your first tax year in business.  They could include incorporation fees, legal fees, accounting fees, filing fees, salaries for temporary directors, etc.  See the IRS website for more information on Startup Cost.

 

Taxes:
This includes income taxes, employment taxes, self-employment taxes, excise tax (see also Publication 510 on excise tax) & personal property tax.  According to the IRS you can deduct various federal, state, local and foreign taxes directly attrituable to your business.  See the IRS website for more information on Taxes.

 

Travel & Entertainment:
Expenses include travel fare, hotel, car rental, meals, dry cleaning & laundry, business calls while on the trip, tips, etc.  Travel must be away from your tax home on business.  Visit the IRS website to learn more about Travel Cost.  There is a 50% limit on entertainment deduction.  Visit the IRS website to learn more about Business Entertainment.

 

Other:  This category includes anything that is not covered in any of the other categories.  Visit the IRS website to learn more about this category.

- Storage
- Marketing/Advertising
- Office Supplies
- Postage
- Shipping
- Utilities
- Facility Repair & Maintenance
- etc.

 

These expenses you cannot deduct

 

 

 

 

 

 

 

 

 

 

 

 

 

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