New data from an online accounting program for small businesses suggests that many sole proprietors from all sectors of the economy are underreporting key expenses that would help them reduce their taxes.
Aggregated information from the program, called Outright, showed that the top expenses reported by traditional brick-and-mortar businesses were taxes/licenses, office supplies, meals, the cost of goods sold and travel. Online small businesses had their highest reported expenses in the costs of goods sold, marketplace fees, shipping costs, office supplies and utilities. Surprisingly, neither group had mileage or advertising expenses among their top expense categories.
"The top expense categories were about what we would have expected given the nature of these businesses," says Laura Messerschmitt, vice-president of marketing at Outright. "We were surprised to see that both mileage and advertising expenses were being underreported."
Small businesses may be able to reduce their taxes next year by tracking and reporting more of these expenses, Messerschmitt says.
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