Why Are Small Business Tax Deductions So Elusive?

2 min read
11/1/23 8:30 AM

“That’s not the answer I wanted,” thinks every small business owner after their CPA says they cannot take the same tax deductions as their golf buddy with a similar business. For a small business owner, it can be frustrating, but even more problematic when the owner does not have the cash to pay the higher than anticipated tax bill. In this blog we’ll highlight a few reasons small business tax deductions aren’t so simple.

It's Complicated: The Complexity of Tax Laws  

Small business owners often find themselves scratching their heads when it comes to tax deductions. One of the primary reasons for this confusion is the complexity of tax laws. The tax code is a vast and intricate web of regulations, exemptions, and deductions that can be challenging to navigate. To make matters worse, tax laws are subject to change, and staying updated can be a daunting task for busy entrepreneurs. This complexity makes it difficult for small business owners to identify and claim all the deductions they are entitled to.

Missing Tax Deductions

Another reason why small business tax deductions can be elusive is that owners may simply overlook eligible deductions. It's not uncommon for business owners to focus on the big expenses like rent and payroll while forgetting about smaller, yet legitimate deductions like office supplies, business meals, or vehicle expenses. These smaller deductions can add up over time, and failing to claim them means leaving money on the table.

Audit Risk

Many small business owners are unable to claim deductions because they are missing one important component. Bookkeeping. Maintaining and optimizing your records is essential to accurately claiming deductions. Keeping meticulous records, seeking professional guidance, and understanding the rules can help owners confidently claim deductions without worrying about the dreaded audit.

Who's your Tax Pro?

One of the most effective ways to navigate the complex world of tax deductions is to seek professional guidance. CPAs and accounting tax professionals are well-versed in the tax code and can help small business owners identify deductions specific to their business. They can also ensure compliance with all tax laws, reducing the risk of mistakes that could lead to audits or penalties. While hiring a CPA or accounting tax professional may seem like an added expense, their expertise will ultimately save money by maximizing deductions and minimizing tax liability.

Small business tax deductions may seem elusive due to the complexity of tax laws, overlooking eligible deductions, and audit risk, but lack of professional guidance seems to be the biggest miss for business owners. To make the most of all available deductions for small business owners, Dillon Business Advisors implements a Team of 3 accounting, tax, and advisory professionals in small businesses to reduce the tax burden and keep more money in the business's coffers.

 At Dillon Business Advisors, we work with owners just like you. Let’s schedule a call to start planning for your future.

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