While Laukka knows talent, she readily admits, she doesn’t know all of the hiring expenses that are tax deductible. And that’s why the veteran recruiter leaves that to a professional.
“Generally speaking my advice is to use a knowledgeable tax and accounting professional because there are so many deductions available,” says Laukka. “We as recruiters and small business owners have so much on our plate it’s important to consult with a tax professional because they can spot things we may overlook during the course of a busy year.”
With the April 15 tax filing deadline fast-approaching many employers have still not filed taxes. Gail Rosen, CPA is one of the New Jersey and New York areas leading accounting firms, specializing in the tax and accounting needs of small and medium businesses and individuals. Rosen says keeping your bookkeeping in order is key to not missing or overlooking tax deductions, especially for employers and those in the staffing industry.
“Each deduction is worth a lot of money to small businesses, especially since they are responsible for paying both sides of social security and Medicare taxes (employer/employee),” said Rosen.
For an expense to be deductible for a recruiter it has to be “ordinary” and “necessary” says Rosen. Therefore, if you spend money on office supplies, businesses dues, business publications, accounting fees for your business, business cards, business entertainment (50% deductible), gifts (limited to $25 a person a year), postage, printing, continuing education, computers and software, it is a business expense and you should keep good accounting books to make sure you do not miss any of these expenses, says Rosen.
Here are 15 scenarios that small businesses can take advantage of when working with a tax professional.
Note: This is not legal advice, but advice on things that can be presented to a CPA when filing, organizing and discussing your possible expenses and deductions.
Recruitment advertising: If you paid to post a job ad online, in a newspaper, on the radio, those advertising expenses are tax deductible.
Job/career fair costs: If you paid to have a booth at a job fair, campus hiring event or industry networking mixer be sure to present these costs to your accountant as these are tax deductible.
Annual dues: Any dues or costs associated with industry organizations, such as the society of Human Resource Management, for example.
Education/Certifications: Any training courses or seminars, certifications or classes/conferences.
Website expenses: Hosting/domain registration fees, site development, design/redesign expenses.
Internet expenses: Monthly fees for Internet expenses.
Cell Phone/land line: Any phone expenses related to your business.
Office Supplies: If you have small office and buy coffee, soda or other supplies (plates, cups, etc.) these should be discussed with your accountant. Same for copy machine, fax, paper expenses.
Insurance policies: Some HR staffing firms provide insurance policies, such as an umbrella policy or workers’ compensation policy.
Legal and tax fees: Did your company negotiate a non-compete or consult with a legal/tax professional for any reason that were related to the business?
Auto/Truck: You can deduct mileage related to work (56.5 cents per mile in 2013), or you can add up all the actual automobile expenses then multiple it by your business percentage (business miles/total miles for the year), but you can’t do both.
Home office expenses: Starting in 2013 the IRS offers you a new “simplified method” for computing your home office deduction at $5 a square foot with a maximum of 300 square feet.
Office leasing/rent: These expenses are tax deductible.
Start-Up Costs: If a recruiting firm just started in 2013, they are often not aware that any expenses that are incurred before the first sale are called “start-up costs” says Rosen. These costs cannot be deducted until the first sale. Then they are deducted over 15 years and you can elect to deduct the first $5,000 in the first year of business. “Careful tax planning is needed in this area,” says Rosen. “Many small businesses assume they can deduct all of their costs in starting a new business but they cannot until they have their first sale. Then costs are deductible based on the laws for that deduction.”
Employee vs. contractor: If you’re a staffing firm that hires and pays employees, the biggest thing to watch for is paying people correctly – are they employees vs. independent contractors points out Rosen.
Remember, each state has its own unique tax laws and rules. And laws change every year. That’s why it’s best to consult with a licensed tax professional to make sure your business taxes advantage of all available tax deductions while also ensuring things are done professionally and legally.