There are several HOT deductions that many taxpayers don’t consider and just ‘leave money on the table’. Here are 6 under utilized write-offs that in my opinion should be a healthy line item on any legitimate small business tax return:

Believe it or not, there are major last-minute tax strategies to consider before filing. Even if you aren’t reading this article the week before that April deadline, there are ideas to consider.

Most importantly, don’t fall prey to thinking that your tax return ‘is what it is’ and that there isn’t something you can do to improve your situation. 

Now, if you are reading this before the first filing deadline, remember this year in 2023 that deadline is Tuesday, April 18^th (for your 2022 filing). I emphasized the word ‘first’ because one of my first last-minute tax strategies is to consider an Extension giving you until Monday, October 16th, 2023.

1. Filing an Extension gives you time to dig up write-offs!

Now, if you are reading this before the first filing deadline, remember this year in 2023 that deadline is Tuesday, April 18^th (for your 2022 filing). I emphasized the word ‘first’ because one of my first last-minute tax strategies is to consider an Extension giving you until Monday, October 16th, 2023.

If you are reading this after April 18th, then you obviously filed an Extension. Good job! Now it’s time to get to work.

Dig up every possible write-off related to your small business and consider the following:

• Review bank statements
• Review credit card statements
• Review Venmo, Apple Pay, and PayPal
• Look for any receipts on paper or in your email

This is WHY you filed an Extension- so you could dig up all of those awesome write-offs. If you have questions about what you can expense, get more education on what your options are. 

2. Maximize the Underutilized Deductions.

There are several Last Minute HOT Tax Strategies that many taxpayers don’t even consider and just end up leaving ‘money on the table’. Now, I realize that some of you may not consider these ‘last minute’ write-offs…However, I think these are the most important last-minute “considerations” (you may have already spent the money, let’s now grab the write-off).

Here are 5 write-offs that in my opinion should be a healthy line item on any legitimate small business tax return:

1. Travel. Assuming the trip is entirely for business, all of those travel expenses are 100% deductible. Think of airfare, train or any public transportation, Uber, Lyft or taxi, rental car and gas, hotel, Airbnb or Vrbo, valet, tips and parking, etc.. Just make sure your 2022 trips had a business purpose. Go over all of your records to maximize this write-off.
2. Dining. Yes, dining out has been a confusing matter after the TCJA. After covid, any and all business meals are now a 100% write-off for 2022. Now, this isn’t ‘food’ in the office but meals IF at a restaurant or take-out. This was legislation to help restaurants after Covid, but it’s been a HUGE benefit to small business owners! Dig up every expense you can find!
3. Home office. There are several strategies on how to maximize the Home Office Deduction. A new strategy was released by the IRS in 2014. Also, if you have an S-Corporation you can still ‘book’ home office expenses on your 2022 tax return. It doesn’t have to be claimed as income by you on your personal return.
4. Electronics. Many taxpayers underestimate the opportunity to write off electronic expenses such as computers, TVs, smartwatches, cameras, and maybe even a drone if needed. Also, don’t forget cell phone expenses for you AND your family members serving on the Board of Directors or as employees. Read here for an article on the topic.
5. Auto. 90% or more of my clients are using the ‘mileage method’. Now, I realize you may not have kept the best records in 2022. Be honest and ethical and ‘go back in time’ to create the best log you can of business mileage. You’re allowed to deduct 58.5 or 62.5 cents per mile in 2022 for any business trips, errands, and client meetings. Also, if you purchased a truck or SUV in 2022 it’s critical you run through the numbers and determine if mileage or actual is the best method for your write-off and consider the 100% bonus deprecation strategy.

3. Contribute to a Health Savings Account (HSA).

Another one of my last-minute tax strategies is that you have until April 18th, 2023 to take advantage of a killer write-off taken right on the front page of your tax return: the HSA! This is one of the most powerful pieces of a well-designed healthcare strategy. It includes saving money, saving taxes, building a tax-free ‘bucket’ for health care, and taking control of your own health care strategy.

1. You save money because in order to have an HSA, you have to have a ‘high deductible health care plan’. Well, chances are you will have a lower premium with a higher deductible and save money.
2. You save taxes because you get a tax deduction when contributing to your HSA, right on the front page of your tax return.
3. You build a ‘tax-free bucket’ of money in an HSA, just like an IRA. The money can be invested and the growth is tax-free and withdrawals for health care are tax-free.
4. Finally, you take control of many healthcare decisions because you can pay cash out of your HSA. Imagine that! No insurance company between you and your healthcare provider where you can control your care and negotiate for lower prices. Even the doctors win!

Things to Remember

Remember, the insurance is completely separate. Get the right type of insurance that qualifies you and then DON’T CALL your insurance company for a Health Savings Account…they don’t administer them- they just sell insurance.

Once you have the insurance, the easiest is to open up an HSA at your local bank. You can sometimes even do it within minutes online. No major paperwork. Just check the proper boxes, sign the form and make a deposit. 

Most Bank HSAs will then give you a Visa card to pay for medical expenses right out of your HSA. However, if you want to ‘let the money ride’ and invest in the HSA. Do not pull out money for medical expenses immediately- for example, “self-direct” (see above).

4. Contribute to an Individual Retirement Account (IRA) or SEP.

Again, one of my last-minute tax strategies is another deduction you can take advantage of after December 31st, but before you file your tax return. The IRA (whether a Roth or Traditional) is an option before April 18^th, while the SEP is a business owner’s option before they file on extension depending on what type of business they have. An IRA is a fantastic way to start saving for retirement.

The Benefits

We as Americans could do a lot more to take action and increase our savings rate. Even if it was just a few hundred dollars a month, it could make a big difference on your tax return, and in the long-run when it comes to retirement. Here are just a few of the benefits:

• With a Traditional IRA, in 2022 you can deduct up to $6,000 per individual and $7,000 if you are age 50 or older. However, there are contribution deduction limits based on your income. Along with whether or not you or your spouse has a retirement plan at work that covers them.
• The Roth IRA also has some unique provisions. Again, you can still contribute $6,000 per individual and $7,000 if you are 50 or older. DO NOT THINK you are limited if you make too much money. There is a strategy called the ‘backdoor Roth IRA’ that allows you to still create a Roth through a conversion process, not a contribution process.
• Both the Traditional and Roth can also be ‘self-directed’ and invested in what you know best.
• Finally, if you ever create a 401k or SEP, you can role the traditional IRA money into these larger buckets in order to pool money for better investment strategies.

Important to Know

If you are self-employed you can bypass the whole IRA strategy and go straight to the SEP. This plan allows you to contribute and deduct up to 25% of your business net income (up to $61,000 in 2022). Along with take a tax deduction on the front page of your tax return. You can still self-direct it and build for retirement much more quickly than with an IRA.

Your deadline is also extended and is determined by your company’s tax filing deadline. If you are filing as an S-Corporation, you have until September 15th, 2023. However, if by chance you are filing as a sole-proprietorship (LLC or not), you have until October 18th in 2023.

With a recent law change under the SECURE Act 2.0 you are now authorized to create SIMPLE Roth accounts, as well as SEP Roth IRAs. This starts for 2023 and beyond. Before this law change these accounts could only have pre-tax funds. You can include these Roth contributions in the employee’s income for the year of the contribution.

Keep in mind, the SECURE Act 2.0 only allows the use of SIMPLE and SEP Roth IRAs after an election has been made. You also have to make the election in a manner approved by the IRS. Even though employees can start doing this today, you need to remember it will take time for systems to allow for such contributions. IRA custodians and employers will also need time to update their educational programs, paperwork, and processes.

The actual tax savings is enormous when you consider a 401k/S-Corp strategy, compared to that of an LLC/SEP strategy. Here is a video on that particular topic you mind find shocking as well as helpful: