Jacksonville CPA | Keeping Business Finances Separate


Hello and welcome to this podcast or this segment of the podcast. My name is Brandon Mcelroy and I’m the president of Mineva, Jacksonville based tax and accounting and consulting firm where we help our clients achieve their goals. Today I just want to talk a little bit about the most overlooked tax deductions for someone who is self employed as a independent contractor. They do not have an employer employee relationship with someone who was withholding social security and Medicare tax and they’re on their own. They don’t necessarily have any employees to take care of, but they are the only worker in their business. Um, so I want to talk about the most overlooked tax deductions in that scenario. So if you don’t have a Jacksonville CPA who is talking about these things and give them an eva a call and we will really help you out with these things. Um, so first off, uh, some deductions become overlooked because some people are not tracking them as they should. So I’ve been over this so many times, but make sure you have your business finances separate from your personal finances. Okay, so a big one is vehicle expenses. Okay. There are two ways to take vehicle expenses.

Most people are going to have in this situation are going to have a vehicle titled in their personal name, which is fine. Um, and you can either claim the business portion of actual expenses for the vehicle. What does that mean? So you’re gonna have gas repairs, insurance, no oil changes, tires, things like that on your vehicle. Those are actual expenses. Now, even though you may use your business, your vehicle for business, uh, you also are going to use that vehicle for personal reasons to go to the grocery stores. You can take your kid to school, whatever it may be. So all of these expenses, you cannot claim 100 percent of them would you do, is you need to calculate your business use percentage and take that percentage of your actual expenses. Okay? How do you figure your business portion? Well, you need to track your mileage and there are a couple of different ways to do it. If you drive a majority for business, then it may be easier to track your personal miles. Why does, what, what does that mean? How, how is it easier to track my personal miles? Well, so for instance, if you drive

20,000 miles in a year and you have 17,000 of those miles are business miles and $3,000 or personal, what was going to be easier to track the business or the personal, the 3000 personal miles obviously. So make sure you always take your beginning odometer and you’re ending odometer at the end of the year and then be sure to track either your business or your personal house. Okay? So if your Jacksonville CPA is not helping northeast tanks and please give them an eva a call and we will help you out.

So, um,

the other way to track vehicle expenses is going to be the mileage method. Now, if you’re Jacksonville CPA is not telling you this, then give Mineva call. The mileage method is simply taking. You still have to track your business miles. You have to track your business miles either way. So the mileage method is where the irs prescribed a mileage rate for each person. So mileage rate for this year, I believe it’s 54 and a half cents a mile. So if you’re driving $10,000 business miles, you multiply 10,000 times, point five for five, so your mileage expense or your vehicle expense will be $5,450. So in most cases the mileage method is the optimal way to go and caveat you cannot flip flop back and forth

with

actual in mileage. So Jacksonville CPA cannot flip flop back and forth with actual and mileage expenses. So once you’ve chosen a method, you have to go with that method. What I recommend for for clients that are just starting off is to run a test for the first year because you, you make your decision when you file your tax return, as to what expense method you’re going to use. So run a test, track all of your actual expenses, track your mileage. I bet you’ll have your business use percentage then at the end of the year and see which one was greater. And you also get to take depreciation on your vehicle.

So the thing with depreciation is it’s only five years, your vehicle will be a five year asset. So if you’re gonna keep your vehicle for longer than five years, then it makes sense to take the mileage method because once the appreciation is gone, it’s gone. The mileage method keeps on giving. So your CPA, your Jacksonville CPA, it’s not giving you this information then give. I have a fault. So overlooked tax deductions, vehicle expenses. Many people take vehicle expenses as we said, there are two ways to do it, track it, track it, track it to make sure you were taking the correct amount.

Now, number two,

business use percentage of personal use items is a big missed opportunity

and it by virtue of you being a self employed person, you are creating deductions for yourself without spending any more money. What does that mean? So example, perfect example is your cell phone. If you’re an employee, let’s just say you spend $100 a month on your cell phone. If you’re an employee, you’re going to. We’re to pay for your cell phone, right? Okay? You become self employed, use that cell phone for business. Let’s just say you use it 50 percent for business. Well, you’re still paying yourself. You’re still paying your cell phone bill $100, but your business can pay for half of it because it’s 50 percent used for business. Okay, so your expense would remain the same whether you’re you are an employee or an employer or a self employed person, but you’ll get to take advantage of items that you use personally already that you were going to use a portion for business, so miss opportunities there for Jacksonville. CPA is not giving you this information to give them a buck. Call. Other items on this list, personal items, personal slash business use items are going to be a cell phones, tablets, computers, Internet, Home Office usage. You know if you’re working through your Internet, retail business and your, you have your storing all of your inventory and your garage and that’s all you use it for. Bingo. You have a deduction there Jacksonville CPA.

So we’ll talk about. We’ve talked about the Home Office deduction. It has to be exclusively and regularly used for business. You can take whatever the applicable percentage square foot percentages. So if your business office is 200 square feet and your house is 2000, that’s 10 percent, you can take 10 percent of all your household expenses, household meeting expenses related to the facility, to the office, the building. So you’re Jacksonville CPA is not telling you these things and give him the Neva.