It's that time of year again when businesses scramble to find ways to write off their marketing expenses. While there are many ways to do this, not all are effective. To get the most out of your marketing efforts, it's essential to understand the different methods available for writing off your expenses.
In this article, the experts at commonthreadco.com discuss critical strategies to help you get the most out of your end-of-year marketing expenses.
Know Which Expenses Are Deductible
There are several business expenses related to marketing that are deductible. Generally, these are expenses directly related to promoting or advertising your business.
Some standard deductible marketing expenses include:
- Advertising costs, such as printing or online advertising
- Business cards
- Costs of promotional materials, such as brochures, flyers, and banners
- Travel costs related to attending trade shows or marketing events
- Fees for marketing consultants or agencies
Keep in mind that there are restrictions on what expenses can be deducted. For example, you cannot deduct any costs that are considered personal (such as clothing). Be sure to consult your accountant to determine which marketing-related expenses are deductible for your business.
Determine Your Method Of Accounting
Before you can deduct any end-of-year marketing expenses, you need to determine the accounting method your business uses. There are three primary methods: cash basis, accrual basis, and modified cash basis.
Under cash basis accounting, you deduct expenses in the same year they are paid or incurred. This method is generally more beneficial for smaller businesses, as it allows them to deduct costs quickly.
Accrual basis accounting requires that you record expenses in the year they incur, even if payment is not made until the following year. This method works well for larger businesses with higher overhead costs and will likely not be able to pay these expenses in the same year they are incurred.
Finally, modified cash basis accounting is a hybrid of the two methods. With this method, you can deduct expenses in the year they are paid or ten days after (whichever comes first).
Gather Records of All Relevant Expenses
Once you have determined the method of accounting that you’ll be using, it’s time to start gathering records of all relevant expenses. This includes any invoices, receipts, or other documents that prove that payment for the costs was made.
You’ll need to have this information on hand to file your taxes, so keep all relevant documents organized and easily accessible. Additionally, if you deduct expenses paid for with a credit card, you’ll need to get copies of the statements from the credit card company. This is necessary for proving that the expenses were paid in the same year they were incurred.
Make Sure You Meet Tax Requirements
Finally, make sure you meet all of the tax requirements before you can write off any end-of-year marketing expenses. For example, if you are deducting travel costs related to a trade show, you’ll need to provide proof that the travel was necessary for business purposes. Additionally, there are certain limits on how much you can deduct in a given year.
Report the Expenses Properly
Once you have gathered all the necessary documentation and made sure you meet all the tax requirements, it’s time to report the expenses. Generally, marketing-related expenses should be reported on Schedule C (Form 1040) of your income tax return.
Be sure to refer to IRS Publication 535 for more information about which expenses can be deducted, which forms to use, and how to report them properly.
Work With A Professional
Working with a professional is a good idea if you are still figuring out how to deduct end-of-year marketing expenses properly. The commonthreadco.com staff believes an experienced accountant can help ensure that all of your deductions are accurate and filed correctly. This can save you time and money in the long run, so it’s worth considering.
To find the best accounting services for your company, look for professionals who specialize in the type of business you run. For instance, a marketing-specific accountant with experience helping small businesses would be the ideal choice for deducting end-of-year marketing expenses. You can also ask for referrals from other business owners or consult industry trade associations.
Make sure you select a reputable accounting firm and review its credentials before making any decisions. Working with experienced professionals can help ensure that your business’s financial records are accurate and in compliance with all applicable regulations. This will help make filing taxes much easier at the end of the year and save you time, money, and stress.
By properly deducting marketing expenses at the end of the year, you can get more out of your budget and maximize profits. However, it’s essential to ensure that all deductions are completed accurately and in compliance with IRS regulations. Working with a professional who specializes in accounting for your type of business can make the process much easier and help you get the most out of your end-of-year marketing expenses.