| Are you wondering whether you are deducting all the | | | | manual record keeping system. It's easy to overlook |
| expenses the law allows for your sole proprietorship? | | | | these charges because you didn't write a check or |
| Here are three commonly overlooked deductions that | | | | use your credit card to incur them. |
| begin with the letter "B". | | | | The same thing applies to merchant credit card fees. If |
| 1. Bad Debts. If you use the Accrual Method of | | | | you accept credit card payments from customers, |
| bookkeeping, you record income from a sale when | | | | fees are probably assessed to your bank account |
| you invoice the customer, regardless of when or even | | | | every month and these fees are automatically |
| whether they pay you. So what happens if they don't | | | | deducted from your bank balance. Be sure to record |
| pay you? Let's say that several months have passed | | | | those charges, too, or you'll miss out on bona fide tax |
| and you keep sending them statements that continue | | | | deduction. |
| to be ignored. By the end of the year, if you've done all | | | | 3. Books, Magazines, Trade Journals. Any book you |
| you can do to collect the payment without success, | | | | purchase for business use is a legitimate tax deduction. |
| you can take a deduction for the uncollectible amount. | | | | Be careful here not to limit this deduction to only those |
| This is known as a "bad debt" and you should write it | | | | books that deal with your particular industry, product or |
| off. | | | | service. Self-help books contain much advice that is |
| What happens if you deduct the bad debt on your | | | | applicable to your life as a business owner, as well as |
| 2008 return and the customer surprises you by making | | | | books on topics such as time management, people |
| payment in 2009? You simply record the payment as | | | | skills, salesmanship and marketing. |
| income on your 2009 return. | | | | And while we're on the topic of reading material, you |
| If you use the Cash Method of bookkeeping, you | | | | probably subscribe to newspapers, magazines and |
| record the income only when the customer pays you, | | | | trade journals that you read primarily for business |
| so there really is no bad debt to deduct. | | | | purposes, so these are deductible as well. |
| 2. Bank Charges. All those annoying nickel and dime | | | | Since none of these three expenses have a specific |
| bank fees that appear on your monthly bank | | | | Schedule C line in Part II, the best place to put them is |
| statement are deductible business expenses. The key | | | | in Part V, Other Expenses. The total of all these Other |
| here is to take the time to carefully examine every | | | | Expenses (line 48) is then transferred to Schedule C, |
| monthly bank statement and then record those bank | | | | Line 27. |
| charges in your bookkeeping software program or | | | | |