Small Business Tax Deductions – How to Deduct Meal Expenses Without Keeping Receipts
The mantra of tax record-keeping has remained relentlessly burdensome for decades: no receipt, no deduction. But fear not, you who loathe the never-ending climb up the mountain of paperwork required by the U.S. tax code.
Many of our most beloved tax rules have exceptions, and such is the case with this one. Believe it or not, there are actually expenses you can legally deduct without a receipt. Here’s one for self-employed folks who travel out-of-town on business.
When it comes to deducting your meals while on an overnight business trip, you have two options with regard to record-keeping.
OPTION #1:
You keep your receipt from each meal and simply deduct the cost of the meal times 50%, a la the “No Receipt, No Deduction” rule.
OPTION #2:
You use The Per Diem Method to determine your meal deduction. For each day of the trip, you are allowed a daily meal allowance, depending on what part of the country you were visiting.
For example, the per diem meal rate for Birmingham, AL is $44. For San Francisco, it’s $64 (as of 9/30/08). Like Option #1, your actual deduction is 50% of the per diem amount — $22 in Birmingham and $32 in San Francisco.
To find the per diem allowances as of 9/30/08 for all parts of the country, get a copy of IRS Publication 1542, available at the IRS website. If a particular area is not listed, then the allowance is $39 per day.
Take note: There are two very nice advantages to The Per Diem Method.
Benefit #1: You don’t have to keep receipts for your meals. Yep, you can pitch ‘em. Scouts honor.
Benefit #2: It doesn’t matter how much you actually spend on meals, you still get to deduct 50% of the per diem amount. This can result in hundreds of dollars in tax savings for you.
Example: You regularly go to several major cities for overnight business trips, traveling about five days each month. These cities all have a per diem rate of $64.
You are frugal. To save both time and money, you prefer to eat at fast food restaurants three times a day. On average, you spend only $20/day on meals.
But the per diem rate is $64/day. If you used Option #1, your actual deduction would be $20 x 50%, or $10/day. With Option #2, you get to deduct $64 x 50%, or $32/day.
The difference between Option #1 and #2 is $22/day. Over the course of the year, this adds up to an extra $1,320 in deductible meal expenses ($22/day x 60 days) — even though you didn’t actually spend the extra $1,320!
End result: you save $396 in taxes (assuming your combined federal and state income tax rate is 30%). And you can throw away 60 days worth of meal receipts.
Whoa . . . $396 in tax savings without spending a dime.
One final note: The per diem method is available to Sole Proprietors, Partners and LLC Members. If your business is a Corporation and you own more then 10% of the company stock, you can’t use the per diem method for yourself. Sorry! That’s taxes for ya.
Building Business Credit in 2010
It is no secret that business credit building is getting harder and harder. Three years ago, it was possible to get $50,000-$150,000 of cash credit, with a shelf corporation within 3-6 weeks with a shelf corporation. Getting an 80 paydex took 2 weeks because many companies who offered net 30 accounts were reporting quickly.
Now, 3 years later, in 2009, it seems like everyone is trying to make this process hard. The companies that offer starter accounts want higher purchases in order to report to the credit bureaus. Some of the companies like Bags and Bowes are no longer reporting. I am sure that they have lost a lot of business. And much of our cash credit with no pg is gone. There are only a few guys left. Key Bank seems to want a PG for everything.
I was going to save this little secret, but Key Bank still has an account that does not require a PG and they are giving nice lines of credit. It is a Key Bank MasterCard, but it is a Net 30 account. Key does not promote this account on their website, so you will have to call in and have them fax or email you an application. Many gurus out there will charge hundreds of dollars just for that information.
I have had clients come from huge companies like B2B credit and Business Credit Magic with no results. These people simply scam you. They assume that you do not know what you are doing and they string you along. I want you guys to know that you can build business credit on your own. The process is simple. There is no rocket science involved, you simply follow the process and get it done. You start with starter accounts; net 30 accounts like quill, uline and grainger; then you get to your tier 2 accounts like your staples, office depot and move up from there. It is a basic thing and you do not need to pay for the business credit builder from DnB. I actually show my clients how to get it for free. Yes, you can get a DnB credit builder for free. No one else out there shows you this. But since building business credit is getting harder, this is actually a better reason for you not to pay for the service because you do not get as much credit as you did a couple years ago, so you don’t get your bang for your buck.
Business Insurance Cost – Know How to Reduce Your Costs
So you have a product to sell, your business plan in place, and some offices or warehouse space sorted now all you need is some business insurance.
How much is that going to cost you? Well, since you’ve decided that business insurance is a very good idea for your company all you need to do now is decide how you’re going to pay for it. But wait, how can you pay for something when you don’t know how much it will cost you. Working out business insurance rates is a very complicated affair.
How much you will be paying for business insurance is not really the first question you should be asking, the real question is, how much it could cost you not having insurance. How much your premiums will cost you are determined by several factors, what type of business your going to run, how much experience and knowledge do you have in that field, what are your risks, where your location is, the size of your business and your credit history. All of the above factors will determine your rates which could be as little as a few hundred dollars or could cost you tens of thousands of dollars.
Its not all bad news though, there are some things you can do that could to reduce the amount you have to pay and not leave yourself open the insurance companies.
Reduce your risk level. Your risk level is one thing that will push your premiums up. Anything you can do to minimize your risk profile will manifest as lower rates. You could be carrying products that are considered high risk these especially will force premiums up, so think very carefully are they really making a big contribution to your companies income if the answer is no then you should seriously think of dropping them from your inventory, you could then go back to the insurance company and ask for a new quote based on the fact you no longer deal in that product. Another way to keep premiums down is through safe working practices low or no claims can also help to reduce costs.
When considering insurance your aim should be to have enough coverage to protect your business but not too much as to be paying for coverage you don’t actually need. The more coverage you have the more its going to cost you, having too much cover well that’s like throwing money away. Every business owner is very thorough when first taking out their insurance cover but only a few ever think to review those costs when the business has been up and running for a few years. Business insurance costs should really be reviewed every year to make sure that you’re not under-insured or more importantly over-insured. Make those yearly reviews and be sure that your coverage stays in line with your business.
Here is something for the small business owners. One way to reduce your insurance costs is to try and find group rates through the business or professional organizations. A large business will get lower rates simply based on the fact they are big. Group rates for small companies can really help reduce rates they work by allowing these companies to join together and enjoy the same benefits that the larger companies can receive. Small group policies will vary depending on the types of businesses involved. But if you can get a few together you can really reduce your premiums.