5 Independent Contractor Services That Bring Small Business Tax Deductions
It’s that time of year again; it’s tax time. Business owners around the U.S. will start scrolling through their receipts from last year looking for deductions. There are countless articles on the web that feature tax deductions that small business owners often overlook. In this article, we want to feature, specifically, 5 independent contractor services that qualify as small business tax deductions.
How does the IRS define a business expense?
According to information on the website of the Internal Revenue Service, “To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.”
What is an independent contractor?
The Internal Revenue Service defines an independent contractor based on a wide-ranged understanding, “The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.”
The IRS warns, “It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors.” Click here to read more about their terms for distinguishing an independent contractor from an employee.
Should I hire a CPA to handle my business taxes?
We cannot answer that very important question for you. Although we are a talented, awarding winning answering service, we are not tax professionals that can give you tax guidance. We can direct you to the IRS website that has a helpful Small Businesses and Self-Employed Tax Center.
Know that CPA’s, accountants and tax consulting firms can help you with the specific small business tax deductions that your business qualifies for. We want to just help point you in the right direction as it applies to specific contractor services that are generally tax deductible.
Independent Contractor Services That Bring Small Business Tax Deductions:
1.) Business Answering Service Expenses
WLGR Accounting Services provides a comprehensive list of small business tax deductions here. In their detailed list they provide page and answering services for your business as tax deductions.
The certified public accountants elaborate and explain business expenses further, “In general, business expenses are deductible if they are reasonable costs you wouldn’t have incurred if you didn’t have your business. If the [business expenses] are ordinary, reasonable, and necessary for your business, they are deductible.”
2.) Advertising, Marketing and Website Expenses
The IRS defines what it considers an advertising expense, “You generally can deduct reasonable advertising expenses that are directly related to your business activities.”
To get a clear understanding of tax deductible marketing efforts, we turn to a recent article, Are All Marketing Costs Deductible? The article shares, “Marketing expenses include, but are not limited to, the salaries and wages of marketing staff and contractors, the costs of administering surveys, creation of advertising, purchases and commissions, sales promotions, public relations efforts, product samples, websites, and direct mail.”
Adam Brewer is a website designer that shares a lot of insight into the possibilities of claiming website expenses as a business deduction. He is straightforward about sharing his ideas of how a website can be deductible but like us, he is adamant that all taxpayers must seek tax advice from a certified accountant. His LinkedIn article is worth a read: Is the Cost of a Website Tax Deductible? In his article he discusses various ways to claim the creation of your website as a business expense.
3.) Accountant and Tax Preparer Expenses
The IRS states, “… professional fees, such as fees charged by accountants, that are ordinary and necessary expenses directly related to operating your business are deductible on Schedule C or C-EZ.”
Sanjiv Gupta, a certified public accountant, states in an informative article, “Tax payers depositing taxes for business enterprises can get specialized tax service fees written-off on relevant tax forms for their business. The absence of clarity in the code increases the importance of tax professionals.”
4.) Business and Tax Legal Expenses
Forbes article, The Only Good Legal Fees Are Tax Deductible Legal Fees, shares with us, “legal fees are the best, for they are fully deductible by corporations, LLCs, partnerships and even proprietorships.”
The IRS advises, “Legal fees relating to personal tax advice may be deductible on Schedule A (Form 1040), if you itemize deductions. However, the deduction is subject to the 2% limitation on miscellaneous itemized deductions.”
5.) Janitorial or Maid Expenses
You always have to ask yourself with each possible tax deduction, “Is this really a business expense, or is it a personal expense that I wish was tax deductible?” You have to be honest when filing your taxes. So if you have a business office that you hire a janitorial staff or maid service to clean, you can look into this independent contractor tax deduction.
Visit the Small Business section of the Houston Chronicle to learn more about claiming the cleaning service independent contractor tax deduction.
Remember, we love to provide you with business advice. But, we are NOT Tax Experts
Yes, we are experts in the telecommunications’ industry and are proud to be an award answering service. That being said, we are not tax professionals nor are we business tax experts. We urge all business owners to consult with a reputable CPA or tax preparer in their state to get the exact rules and qualifications of these small business tax deductions.
Visit our recent article that touches on the various services we offer, “What is an inbound call center?” Discuss these answering, message and dispatching services with your business accountant to understand how you qualify for this tax deduction.