With Uncle Sam’s tax deadline looming, it’s time for Notary entrepreneurs to start getting their records together. The key is finding the tax deductions and write-offs that work best for you.
Here are some options and tips from the Internal Revenue Service, the National Federation of Independent Businesses and the U.S. Small Business Administration.
- Operating Expenses vs. Capital Expenses: Your basic office and notarial supplies, including Errors and Omissions insurance policies, Notary seals and journals, even the cost of your bond, may be written off as operating expenses — as long as you purchased those items, and not your employer. Capital expenses refer to fixed assets, which the IRS categorizes as business start-up costs, business assets, and/or improvements. This can include buildings, equipment, office furniture, motor vehicles, and other assets. Capital expenditures are typically depreciated for tax purposes. Refer to the IRS’Publication 535 to see if your items are considered operating or capital expenditures.
- Home Office Deductions: If you conduct business out of your home, you can write off a percentage of your household expenses, including utilities, rent, insurance, maintenance, parking fees, pest control, even home owner association fees. Base your figures on the percentage of your dedicated office area in comparison to your home’s overall square footage. The IRS is very specific that the area you claim as a home office is used only for conducting business, so your dining room table doesn’t count.
- Communication Expenses: Home phones and cell phones used for work purposes are tax-deductible and can be listed under business property. If you use the web for work — for example, if you communicate with clients via email or advertise your signing services through social media or your own website — you can add Internet bills to your itemized write-offs.
- Travel/Mileage: If, like many NSAs, you use your car for business purposes, the IRS allows you to deduct mileage costs for all travel-time completed for business. According to Topic 511 of the IRS’ tax guide, you may deduct travel expenses for work-related conventions, which would include the NNA’s Annual Conference.
- Bad Debts: If you have significant outstanding debts from clients, you may be able to write them off as a “bad debt” expense.
- Education Credits: Specialty or continued education courses — including Notary seminars or other professional certification courses — can be tax deductible, as they relate to your industry and are taken to boost your career.
- Charitable Donations: Checks you wrote to the National Notary Foundation, the Calvin Coolidge Memorial Foundation or any other charitable, non-profit organizations are considered tax deductible, as are product donations you made, such as clothing, appliances, or an old vehicle. Just be sure to have the records to support your donations.
Keeping It Organized
Most tax experts recommend that small business owners view tax planning as a year-round activity, and a crucial element of that is keeping complete and accurate records. Just as your Notary journal protects you from liability, keeping organized records of all business-related income and expenses is your best defense against a potential IRS audit.
Creating and maintaining an organized, carefully labeled filing system containing work-related receipts or bank statements throughout the year makes it easy to complete your tax forms, while also providing the documentation you need to justify your deductions. Experts recommend keeping your business and personal accounts as separate as possible. Opening business-only credit and bank accounts, for example, can make itemizing expenses much easier to track come tax day.
For questions about your specific tax situation, consult your tax professional.
Kelle Clarke is a Contributing Editor with the National Notary Association.