Mom-and-pop retail outlets come in all shapes and sizes. From stores selling handmade afghans, to those offering a variety of ice cream flavors, small and family-owned retailers run the gamut far and wide in every industry. But there is one thing they all have in common – they can take advantage of many of the same tax strategies and use many similar tax deductions to stay IRS compliant and keep more of the hard-earned income their businesses generate
Consider using these tax tips and tax deductions for mom-and-pop retailers:
Tax Tips for Mom-and-Pop Retailers
– Be aware of the sales tax requirements of the state in which your retail store is located. Keep in mind that cities, counties, and municipalities often have different sales tax requirements for businesses. If you operate stores in more than one state, you may be on the hook for multiple state sales tax filings.
– When you buy certain equipment for your retail store, you can either deduct the cost of the equipment in the year in which it was purchased, or you can deduct it in smaller amounts as its value depreciates over time.
– To claim employee pay and benefits as a deduction on your tax return, such compensation must be provided for work employees perform, and it has to be reasonable compared to local pay scales at similar retailers in your area. If the IRS believes you are overcompensating employees based on the financial information you report, this compensation may not be deductible.
– Always maintain solid personal and business tax records by documenting all purchases and keeping all relevant receipts. Running a retail store comes with far more expenses than other forms of self-employment, so this is extremely important to help you stay IRS compliant and claim the tax savings you deserve.
Tax Deductions for Mom-and-Pop Retailers
– Property rental fees
– Maintenance expenses for property, i.e. utilities, a cleaning service, structural repairs, etc.
– Equipment, i.e. computers, cash registers, furniture, lighting fixtures, desks, chairs, tables, shelving, window displays, office supplies, etc.
– Employee salaries, insurance, retirement accounts, sick leave, vacation pay, awards, bonuses, etc. (as long as this is reasonable compensation)
– Cost of goods sold, i.e. clothing, electronics, sporting goods, food, beverages, arts & crafts, collectibles, etc.
– Depreciation on property
– Fees for accounting, legal, and other professional service providers
– Property insurance, liability insurance, etc.
– Marketing expenses, i.e. website & hosting, social media marketing, local newspaper ads, TV & radio commercials, etc.
– Business gifts to customers (limited to $25 per recipient per year)
Photo by Ian Baldwin on Unsplash
Brendon Pack is Vice President of Sales & Business Development at 1-800Accountant, the nation’s leading accounting firm for small business owners. Mr. Pack has developed an innovative line-up of products to assist business owners with their tax and accounting needs. He is dedicated to making accounting easy, accessible, and affordable for small-business owners everywhere.