Starting a tutoring business requires that you learn how to do taxes in a new way. You are now able to deduct things that you have never been able to deduct before and this is really great. When you work a job, you can’t write off the mileage. However, when you own your own company this is a small business tax deduction.
This past week I was supposed to do an interview with a man that claims to be a tax expert. What I realized after reading his content was that he crosses that line of good ethics. What I found out is that he doesn’t break the tax law, but he uses it to his advantage in unethical ways. It is not my intent to bad mouth this man, but really, to raise the issue of what is ethical when it comes to taxes.
If I need to buy a present for a friend and I purchase a couple of office supplies, according to this man, then I could write off the mileage I used to go there as long as I state that my primary purpose was to get office supplies. Now this kind of deduction may seem minimal, but they will add up after time. Especially since I don’t have to pay taxes on anything that is not positive earnings for my small business.
In his book that he wrote he states that you can’t write off cruises as a tax deduction if you have business meetings there, but if you have a business meeting wherever your destination is, then you can deduct the cruise as your means of travel. Remember that your primary purpose has to be business. If you are going on a cruise, is it really your primary reason to have a business meeting at your destination? This is where ethics comes into play. No wonder this man had an F rating from the Better Business Bureau. It is really important that you pay attention to people that have ethical practices when it comes to deducting your business expenses.
When I teach people what they can deduct from their taxes as a tutor online in my Tutorpreneur class, I use the acronym TRIPS. TRIPS stands for all of the small business tax deductions that I can make.
T = Travel
R = Running your Business
I = Incur
P = Professional Development
S = Supplies
Before I became a tutor online I wasn’t able to deduct any of these things. As a classroom teacher I could only deduct $200 of what I would spend on classroom supplies. I probably had met this deductible the second week of school each year. Now that I own my own business I am able to deduct so much more. So let’s take a closer look at some of these ethical things that you can deduct.
First, is travel. Each week I do need to go to the post office and to the bank. Each time I make this trip, I am able to deduct it as mileage. It is important to keep track of the mileage and there are some great tools out there that can help you do this. I personally use Tax Bot. This is an app that I have downloaded to my phone. Every time I make a trip that is business related in my car, all I have to do is track the mileage and enter it in. I always have my phone on me, so now I don’t run into the mistake of not claiming that mileage, (which I used to do all of the time). In fact, many small business owners don’t take the time to claim half of what they can legally and ethically claim. So having this one tool, can literally save you thousands of dollars. Keeping track of my expenses has never been more fun.
The second area that I can claim is anything that I need to run my small business. As an online tutor I need internet, phone, office space, subscriptions to reading websites, advertising, utilities, and storage space on Dropbox. All of these are expenses that I can deduct. The government treats home businesses the same as large out of home businesses. So regardless if I have an office that is out of the home or in the home I can deduct every cost associated with running my business including utilities. I can even deduct the amount of space my office takes up in my home off of my mortgage.
Other expenses that I incur include bank fees, charitable contributions, business gifts, teaching license, postage, shipping, and printing. These are like those miscellaneous expenses that sometimes people can forget to deduct. However, if you are constantly forgetting to deduct what it costs to run your business, then you are making very costly mistakes. Who couldn’t use a couple extra hundred dollars for remembering?
I love owning my own home based business now. Especially since I can learn as much as I want about my craft or how to run a business and deduct it. This is just awesome. Most of the time the classes that I take help me with running my company more effectively so they make me more money and I get to deduct it, so it is really a no brainer. Why wouldn’t I continue to give myself the competitive edge by learning more and more? I also love that when people take my Tutorpreneur class, they are able to deduct it.
The last area that I can deduct is supplies. So all of the paper, pencils, pens, computers, notebooks, manilla folders, index cards and so on can be deducted as expenses. At the end of the day I don’t want to spend all of my money in this area, because I do want to make a profit with my company, so I need to make wise spending choices.
Most small businesses do not claim the amount of taxes that they need to. In fact, most of us forget about quite a lot of what we can deduct. If you fall in this area, don’t worry now that you know, you can deduct it. However, if you are looking for information on the internet about taxes, be weary of people who are giving you advice about things that sound unethical. If it sounds unethical, then trust your gut and stay on the safe side with your deductions.
I would love for you to comment below and let me know about your thoughts about ethical tax deductions. Do you claim all that you could or do you forget to mark some down like I used to?