Bandicoot | Accounting Solutions

ADVICE FOR SMALL BUSINESSES

Why Lack of Awareness About Tax Deductions is Costing Your Business Thousands

As a business owner, you work hard to grow your business and maximize profits. But what if you’re leaving thousands of dollars on the table simply because you’re unaware of the tax deductions you qualify for? Failing to take advantage of available deductions can significantly increase your tax liability and cost your business valuable resources. Here’s why a lack of awareness about tax deductions is hurting your bottom line—and how to fix it.

 

1. Missed Deductions Add Up Quickly

Every missed deduction is money you’re unnecessarily giving to the IRS. Whether it’s unclaimed travel expenses or overlooked office supplies, these small amounts can add up to thousands over time.

 

Common Missed Deductions:

  • Home office expenses for remote work.
  • Employee benefits, such as health insurance contributions.
  • Marketing and advertising expenses like social media ads and website hosting.

 

How It’s Costing You:

  • You pay more in taxes than required, reducing profits.
  • You miss out on opportunities to reinvest in your business.

 

2. Poor Recordkeeping Limits Your Claims

If you’re not keeping detailed records of your expenses, you’re likely missing out on deductions. Many business owners fail to track or document expenses thoroughly, making it impossible to claim them at tax time.

 

Examples:

  • Lost receipts for travel, meals, or supplies.
  • Untracked mileage for business-related trips.

 

How to Fix It:

  • Use tools like Expensify or Hubdoc to digitize receipts and invoices.
  • Set up an organized filing system to categorize expenses by type.

 

3. Lack of Professional Guidance Leads to Overpayment

Navigating the tax code can be complex, and without professional help, it’s easy to overlook deductions. Many business owners try to handle taxes on their own or use generic software without tailoring it to their industry.

 

The Impact:

  • Missed industry-specific deductions, such as depreciation for real estate or cost segregation studies.
  • Overpayment due to lack of understanding about tax credits and incentives.

 

How to Fix It:

  • Hire a CPA who specializes in your industry.
  • Schedule an annual tax planning session to identify potential deductions and credits.

 

4. Overlooking Tax Credits

While deductions lower taxable income, credits reduce the taxes you owe directly—and they’re often even more valuable. Unfortunately, many business owners are unaware of credits they qualify for.

 

Common Overlooked Credits:

  • Research and Development (R&D) Tax Credit for innovation and development.
  • Work Opportunity Tax Credit (WOTC) for hiring individuals from specific groups.
  • Energy-efficient building credits for real estate and construction businesses.

 

How It’s Costing You:

  • You’re missing out on significant tax savings that could offset your liability.

 

How to Fix It:

  • Research federal and state-specific credits applicable to your business.
  • Work with a tax advisor to ensure all eligible credits are claimed.

 

5. Failing to Maximize Depreciation

Depreciation allows you to deduct the cost of long-term assets like equipment and property over time. However, many business owners fail to take full advantage of accelerated depreciation methods.

 

Examples of Depreciable Assets:

  • Machinery, vehicles, and office equipment.
  • Furniture and fixtures.
  • Rental properties and improvements.

 

How to Fix It:

  • Use Section 179 or bonus depreciation to write off eligible assets in the year of purchase.
  • Consider a cost segregation study to accelerate depreciation on commercial properties.

 

6. Missing the Benefits of a Home Office Deduction

Many small business owners working from home avoid claiming the home office deduction because they fear it will trigger an audit. However, the IRS has simplified this deduction, making it easier than ever to claim.

 

What You Can Deduct:

  • A portion of your rent or mortgage.
  • Utilities and maintenance for the workspace.

 

How It’s Costing You:

  • By not claiming this deduction, you’re paying taxes on income that could have been offset.

 

How to Fix It:

  • Use the simplified method ($5 per square foot, up to 300 square feet) or calculate actual expenses for your home office.

 

7. Unclaimed Employee Expenses

If you provide benefits, training, or tools to your employees, these costs are deductible. Failing to track these expenses means losing out on valuable savings.

 

Deductible Employee Expenses:

  • Training programs and professional development.
  • Tools and equipment provided to employees.
  • Employer-paid payroll taxes and insurance premiums.

 

How to Fix It:

  • Track employee-related expenses separately in your accounting software.
  • Provide employees with detailed expense guidelines to ensure accurate reporting.

 

8. Not Tracking Travel Expenses

Business travel expenses are fully deductible, but many business owners fail to track them properly.

 

Deductible Travel Expenses:

  • Flights, hotels, and transportation.
  • Meals and incidental expenses during travel (50% deductible).

 

How It’s Costing You:

  • You miss out on deductions for travel that directly supports your business.

 

How to Fix It:

  • Use apps like TripLog or MileIQ to track business mileage.
  • Retain all travel-related receipts and document the purpose of each trip.

 

How to Stop Leaving Money on the Table

 

Invest in Accounting Software: Tools like QuickBooks or Xero automate tracking and categorization of expenses.

 

Stay Organized Year-Round: Regularly review and reconcile your financial records to ensure no expenses are overlooked.

 

Consult a Tax Professional: A CPA can help identify deductions and credits specific to your business.

 

Conduct Quarterly Reviews: Don’t wait until tax season—review your expenses quarterly to stay ahead.

 

Educate Yourself: Stay informed about changes in tax laws and industry-specific deductions.

 

Final Thoughts

Failing to claim all eligible tax deductions isn’t just a missed opportunity—it’s costing your business thousands of dollars that could be reinvested into growth. By staying proactive, organized, and informed, you can maximize your deductions and keep more of your hard-earned money.

 

At Bandicoot, we help businesses uncover hidden savings and optimize their tax strategies. Contact us today to learn how we can help you reduce your tax burden and put more money back into your business.





N. Cace

Senior Associate @ Bandicoot