LAS VEGAS (KTNV) — 2020 will be remembered for a lot of things, including the year millions of people took their shot and opened up a small business.
Now those business owners have to navigate tax season.
13 Action News anchor Tricia Kean gets big answers for small businesses from a local tax expert.
CAREER WAS GONE
"No warning. No severance. Just poof! My entire career was gone," said Jill Shlesinger.
Like many Americans, she recently found herself out of a job. The Las Vegas cafe where she served as general manager for more than 10 years, closed during the pandemic.
"To stay busy, since I wasn't working, I was baking for myself because I was craving pieces of bread and sweets," Shlesinger said.
BUSINESS OF HER OWN
Shlesinger was baking sugar-free and gluten-free goodies, which her friends and family absolutely love. She started selling some and that became a recipe for a business of her own.
"Which has taken off in a whirlwind and it's a blessing," Shlesinger said.
Things are going so well she says she plans to open her own bakery, Starburst Parlor, later this summer. But Shlesinger has racked up thousands of dollars to get the equipment she needs.
"There has been a significant amount of charging, unfortunately," Shlesinger said.
Now she has a lot of questions before even officially opening for business. Among them, she's wondering how much of her credit card expenses she can right off.
"If an expense is considered ordinary for your line of work and necessary for you to run your business, then it's going to be deductible," says CPA, Kim Walker.
She says there's no pre-set dollar amount on what you can write off. But some things you can't deduct include clothing, plus limits on entertainment and gifts for clients. If you are looking to write something off, just be sure to keep the receipt.
STATEMENT NOT ENOUGH
"Many people think that the credit card statement showing those expenditures is enough for the IRS. It is not," Walker said.
If you're looking to deduct driving expenses, for example when making deliveries, you'll need even more proof than just gas receipts.
LOG YOUR MILEAGE
"The IRS requires that you keep an auto log for your mileage during the year. Not only the total mileage driven but the business miles," Walker said.
Shlesinger also wants to know about deducting the cost of equipment purchased by her boyfriend. Walker says if a friend or family member pays for something, be sure to write up an agreement stating the amount provided and for what.
"A note between the two of them, she's borrowed money from him. Similar to how you would borrow money from a bank," Walker said.
Be sure to also keep those receipts for your records and then you'll be ready to deduct those expenses. Finally, your small startup may not have employees but remember this:
"If you pay an independent contractor over $600 a year for work they provide to your company, you have to issue them a 1099 form," Walker said.
READY TO FILE
Shlesinger says there's still a lot to do before she's ready to file her taxes. But she's definitely ready to share her love for cooking.
"Ultimately that's my goal, just to become a part of the community and not let the pandemic stop me," Shlesinger said.