To make sure you’re getting the most out of your tax deductions, here are some strategies for proper tracking:

1. Use Accounting Software
   • Accounting software like QuickBooks, Xero, or FreshBooks can help you track expenses, categorize them correctly, and generate reports for tax purposes.


2. Separate Personal and Business Expenses (THIS IS CRITICAL)
   • Open a separate bank account and credit card for your business. Mixing personal and business expenses can complicate record-keeping and raise red flags with the IRS.


3. Outsource Your Monthly Bookkeeping to A Well Qualified Bookkeeper
   • Not only will this give you piece of mind when tax time arrives. A Certified Bookkeeper can help steer you in the right direction during the year with helping you make changes that your Tax Professional or C.P.A. advise you to do. The Certified Bookkeeper will work directly with the person you use for your taxes. Then at the end of the year you will take everything they want (which in most cases they have communicated to your bookkeeper earlier) that has been maintained and kept well organized and formatted in the way they want to see it throughout the year. Then all you do is walk in and give them a packet with the information and walk out. Then your bookkeeper will email them electronic encrypted files to support the packet of documents you gave them. Your bookkeeper will answer any questions they may have about a report. Contacting you later to keep you up to date with any questions they have asked and how you answered them. Transparency is something a well-qualified bookkeeper embraces as part of their business. By giving it to your tax preparer in such a manner, this will save you sometimes hundreds of dollars on your tax preparation because if you take the information to them and they first have to prepare a year’s worth of financials and organize it in a manner that they can use it to complete your return it will take them hours of labor which I have seen them charge up to $400.00 an hour to organize information AND then add the preparation of the return. Literally, I have seen examples over my 35 years in accounting that a small business owner would end up spending between $8,000.00 - $12,000.00 to file their return at the end of the year. This is why outsourcing your bookkeeping to a well-qualified bookkeeper is worth every dollar.


4. Maintain Good Records
   • Keep all receipts, invoices, and bank statements related to your business expenses. Cloud storage services (Google Drive, Dropbox) can help store documents safely.


5. Hire a Tax Professional or Accountant
   • A professional can help you identify deductions you may have missed, ensure you're complying with tax laws, and help with filing.


6. Track Deductible Expenses in Real Time
   • Don’t wait until the end of the year to start tracking your deductions. Record expenses as they happen to prevent missing any deductions.


7. Review IRS Publications
   • Familiarize yourself with IRS Publication 535, which details business deductions, or consult with a tax professional to make sure you’re not overlooking any eligible deductions.


8. Keep Detailed Logs and Documentation
   • For deductions like mileage or business meals, keep detailed logs. The IRS requires supporting documentation for many of these deductions to be valid.

By staying organized and properly tracking expenses, small business owners can ensure they take full advantage of all the tax deductions available, ultimately reducing their tax burden and improving their bottom line.