Small business tax deduction are more or less implemented by the government to encourage entrepreneurship and investment.

A business owner can save large chunks of money through these small business tax deductions. In general special small business tax deductions are granted for home based business establishments.

Small business tax deduction are normally implemented on the expenses involved in the business. In an ideal scenario these expenses include office stationeries, advertisements, postage charges, shipping fees, telephone bills, and Internet charges. The receipts of each buying should be produced while filing for the taxes. On the other hand in case a business owner joins any franchise, expenses such as franchise fees and kits can be claimed as deduction. Whats more even the gift items and freebies given to the customers are accounted as business expenses and thus attract Small business tax deduction. Business owners usually have to face the hassles of bounced checks received from customers. Fact remained that these checks along with the bank fees can be utilized for claiming tax deductions. The rules governing small business tax deductions have some sort of special provisions for business owners who have purchased computers. It is worth noting that the business owner can claim for tax deduction in an amount equivalent to the cost of the computers. In addition, he/she can claim depreciation for 3 years following the purchase of the computers.

Remember that the tax deductions largely depend on the type of business and the expenses that are involved.

It is quite mandatory that a business owner should ideally consult a professional tax advisor before filing for taxes. Taking the business structure into account, the tax advisor would be able to give the best suggestions regarding small business tax deductions. In addition he/she can also help the owner adjust the income so as to attract the maximum deductions. Small business tax deductions therefore help in avoid paying high taxes, which in turn helps in the growth of the business.

Practically speaking every Small business tax deduction has receivables that it cannot obtain from clients. In case if your small business doesn't have any such receivables, consider yourself lucky. On the other hand for those small businesses that suffer from uncollected receivables, solace can be taken from the fact you can claim a tax deduction.

Bad Debt Tax Deduction

In theory a small business can write-off bad debt losses if it meets nominal requirements. To claim such a tax deduction, the below mentioned must be shown:

A. Firstly the existence of a legal relationship between the small business and debtor;

B. Moreover the receivables are worthless; and

C. The small business suffered an actual loss in reality.

Proving there is a legal relationship between the small business and debtor is fairly straightforward. As a matter of fact you must simply show that the debtor has a legal obligation to make a payment. Majority of businesses issue invoices or sign contracts with debtors and these documents suffice to prove the legal relationship. In case if you are not putting your business relationships in writing, you should begin doing so immediately.

Proving receivables are worthless is slightly more complex in nature. A small business is needed to show that the debt has become both worthless and will remain so. Furthermore you must also show that you took reasonable steps to collect the receivables, but you are not necessarily required to go to court to meet this requirement. A clear instance where you would meet this requirement is if the debtor filed bankruptcy.

While proving that you suffered a loss may sound like the easiest need to meet, the issue is a bit more complicated. It is worth mentioning in this regard that the Tax Code defines the loss as an amount that is included in your books as income, but is never collected. A classic instance of such a situation would be a manufacturer that provides products to retailers on credit. The manufacturer can depict a real loss if the retailer files bankruptcy. Unfortunately, there is almost no method to claim a loss if you provide hourly services and use a cash accounting method. The IRS does not take into account the expenditure of time and effort to be a sustained economic loss.

More often than not small businesses suffer from uncollected receivables. In case if you failed to claim such losses as a tax deduction during your last three tax filing years, you should file amended tax returns to get a refund.

Those small business owners, who are interested in saving money, would do well to check out the small business tax deduction. This deduction is a method to lower the amount of tax you would have to pay. The way this is possible is with the help of deducting some of the costs of running your small business. As long as these expenses fall in line with the Internal Revenue Service's Code 162 that emphasizes "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business" then you are sure to be able to take advantage of the Small business tax deduction.

In an ideal scenario a common list of some of these costs includes traveling, entertainment, rentals and allowances for employees. Yet remember that the Internal Revenue Service is a bit more conservative in their allowance of what can be claimed, one important thing to remember is that these costs shouldn't be unreasonably large. This clearly means you should be careful in how much things cost, and make sure the costs match the claim of what you say something costs and never claim personal expenses. In theory doing either of these things will disqualify you for the tax reduction.

According to experts something else you may want to be careful about is not making any payments to relatives, no matter if it is warranted. It pretty much seems that the tax auditors from the Internal Revenue Service can be very picky when it comes to this matter.