Tax season can be a daunting time for many small businesses, as the complex process of navigating deductions and tax write-offs can feel like an overwhelming task. It could be tricky to track down all expenses and decide which of them are deductible. 

However, there are ways to ease the burden and streamline this process. Here, we offer a simple explanation and tips for preparing for a tax write-off. One effective approach is to utilize technology like Scanner Pro to track all expenses and create detailed and accurate expense reports. This will help you to maximize tax write-offs while maintaining compliance.

What is a tax write-off?

First things first, let’s briefly cover the basics. Tax write-offs, also referred to as tax deductions, are expenses that can be subtracted from your total taxable income. By reducing your taxable income, you can lower your overall tax liability, potentially leading to substantial savings. To take advantage of these deductions, it's crucial to keep detailed records of all eligible expenses.

It is also important to get familiar with what type of expenses are subject to and can qualify as a tax write-off. Check out the tax deduction policies in your country and consult with your accountant to understand tax write-offs and how keeping a record of expenses can benefit your small business.

How do tax write-offs work?

In short, when you file your taxes as an entrepreneur or a small business, the taxing authority in your country (e.g., IRS in the US, HMRC in the UK) looks at your reported income, tax deductions, and credits to calculate the tax amount for you. Hence, tax deductions, or tax write-offs, are a crucial part of the process. Here's how it generally works:

  1. Identifying deductible expenses and keeping records: Tax write-offs typically apply to certain expenses directly connected to your business and are allowed by the tax authority. Common examples include travel tickets, transportation, salaries, and office rent. Maintaining accurate records of your expenses, including receipts, invoices, and other documentation, is crucial. This documentation will serve as evidence if you are audited.
  2. Understand depreciation: For certain assets like equipment, vehicles, or property, small businesses may not be able to deduct the full cost of the asset in the year it was purchased. Instead, they may need to depreciate the cost of the asset over its useful life, which means to deduct a portion of the asset's cost each year.
  3. Claiming the deduction: Include all deductible expenses when you file your taxes. This will reduce your taxable income and lower the taxes you will pay. 

What are the most common small business expenses that are tax deductible? 

When you calculate a tax return for the year, you need to include all business expenses in the calculations. These expenses should be directly related to conducting your business and might include:

  • Operating expenses: These are directly related to running your business, such as rent for your office or workspace, utilities, internet and phone bills, office supplies, and postage.
  • Employee salaries and benefits: The wages, salaries, bonuses, and benefits you pay to employees are generally tax deductible. 
  • Supplies and inventory: Costs associated with purchasing supplies, raw materials, and inventory for resale are typically deductible. 
  • Business travel: Expenses related to business travel, including transportation (such as airfare, train tickets, or mileage for driving), lodging, and meals.
  • Vehicle expenses: If you use a vehicle for business, you can typically deduct expenses such as mileage, gas, maintenance, insurance, and depreciation. 
  • Marketing and advertising: Costs associated with promoting your business, such as advertising expenses, website development, printing costs for marketing materials, and sponsorships, are generally deductible.
  • Professional services: Fees paid to professionals such as accountants, lawyers, consultants, and freelancers.
  • Equipment and depreciation: The cost of purchasing or leasing equipment for your business and depreciation on those assets over time is generally deductible. This can include computers, machinery, furniture, vehicles, and other tangible assets used for business purposes.

Please notice that your business can have expenses specific to your industry that are not listed here and could be deductible. 

If you keep track of all these expenses, including paper for digital recipes and invoices, you can later list them all for a tax deduction and reduce the size of taxable income. Ultimately, this means you will lower the taxes you need to pay. 

Scanner Pro

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How to prepare an expense report for tax write-offs in Scanner Pro?

With technology like Scanner Pro and your iPhone or iPad, you can easily scan your receipts the moment you make an expense, and use the Expense Reporting feature to gather all the key information from the receipts in one file. No more lost receipts and no more time wasted in Excel or Spreadsheets entering all the details manually.

Scanner Pro allows you to scan receipts one by one or scan them all at once. Once you have your receipts in the app, consider the most difficult part done. All you have to do is tap More menu in the upper right corner > select Expense Report, and choose the receipts. 

Screenshot of expense report feature in Scanner Pro app for tax write off preparation

Scanner Pro will do its magic and capture the key information such as Date, Vendor, Type of expense, Amount, and Tax*.

* You can edit the expense report prepared by Scanner Pro and enter the tax for each expense manually if it is not displayed. 

What is also great about this feature is that expense reports can be exported in two formats: PDF and CSV.

Screenshot of receipts and expense report in Scanner Pro app

Once you get your expense report, various options are available. You can send it by email, export it to other apps such as Google Drive, print or share it with your accountant. 

Technology has transformed the way we manage and report expenses, making tax season less daunting and more manageable. Utilizing tools like Scanner Pro can significantly simplify the process of creating expense reports, ensuring that you have a comprehensive record of all eligible tax write-offs. 

Get organized for tax time with Scanner Pro

Scanner Pro

Take high-quality scans

Easily turn papers into PDFs with your iPhone and iPad. Scan receipts, books, IDs, invoices.