Every entrepreneur has their own reasons for going into business. Some for personal wealth, others to provide the best they can for their families. Some do it to pursue their passions or fulfill a dream, others to leave a legacy.
Regardless of the whys of the entrepreneurial spirit, there are tried and true methods to attaining that success – as well as all-too-common missteps.
Especially this one.
I owned a professional accounting firm for just over 10 years. In that time frame, I saw hundreds of small business owners, each with their own dreams. I saw thousands of problems. I heard of a million excuses.
The common threads were the same for almost every single entrepreneur.
Most wanted to make more money, and to do that…inevitably they needed to pay less tax.
However, this one mistake was stopping them from being successful at that goal.
Entrepreneurs must clearly understand the magic of the “write off”.
Yes, I said magic. As a Certified Professional Bookkeeper and long-time entrepreneur, the “write off” is easy to understand.
For my clients, however, it wasn’t so clear-cut.
This can be especially true for solopreneurs who work alone, who tread a particularly fine line between business and personal expenses.
Picking up that binder or notepad for work while shopping for the groceries, for instance. It’s only ten dollars worth of supplies. Who cares about the receipt? It’s not like you’ll get a ton of money back.
If you think that small receipt doesn’t matter, think again.
You didn’t give that receipt to your accountant, or maybe you threw it away.
Since you cannot claim this lost receipt for $10, you will send an additional $3 (30%) to the CRA at the end of the year.
In of itself, that may not seem like a big deal. But if you’re guilty of mistakes like that, chances are, you’ve been in the habit of doing it all year.
Missing bigger write-offs, or a few dozen smaller ones, can lead to a huge increase in the taxes you owe.
Believe me…. every receipt matters.
Can you live with that $3 in extra tax? Probably. What is truly dangerous is the habit of not properly tracking expenses, of missing write-off opportunities, of not doing your due diligence when it comes to the timely organization of your receipts.
So, what is a “write off”? How can its magic formula apply to you?
Any expense that a business incurs with the intent to make money = write-off.
Now, the word “reasonable” applies here.
You need to have a reasonable explanation why this item should be considered a write-off.
“Write offs” can include almost any amount of money your business spends.
The “write off” should be determined at the time the money is spent.
In some cases, it can include money you spend personally as well. My Entrepreneurial Intelligence courses cover them in greater depth to show you how to maximize write-offs for your business.
For now, you need to ask yourself, “Did I spend this for my business in any way?”
If your answer is “YES”, then you should seriously consider keeping that receipt!
In Part Two of our blog on Write-Offs, we’ll look at some examples of write-off situations and share with you some exciting free resources –just in time for tax season!