Miscellaneous expenses refer to costs to your business that typically do not fit within specific tax categories or account ledgers. Regular, extensive and ongoing expenses, like payroll, office rent or inventory supplies, are all trackable accounts which record their associated costs each month.
So, what does that mean for your small business, and how do miscellaneous expenses operate in accounting?
Miscellaneous expenses are small transactions and costs that do not fit within the ledgers’ specified accounts or a specific tax category. These expenses must be recorded and accounted for in your business’ general ledger. In the event the items classed as miscellaneous expenses increase in size and usage, then the miscellaneous expenses should be given its own account.
Businesses keep various types of journals and ledgers for accounting purposes and financial record-keeping. Specific types of income and expenses warrant their dedicated ledgers, like a sales ledger or utility ledger, for any incoming and outgoing expenditures.
The miscellaneous expenses category offers an easy and concise method to record small expenditures that are too insignificant to warrant their own account, which can be lumped into one general account.
This category is given its own aggregated line on an income statement account for clear and concise tax return-filing purposes. Depending on your country's regulations, a tax deduction may also be made on miscellaneous expenses for business use.
Deductible miscellaneous expenses vary by country and are contingent on their local regulations. Though these vary by country, the following are common expenses that you may be able to write off:
Small, periodic, or one-off costs for clothing required for your work, such as a uniform or protective clothing, can be considered a deductible. However, these miscellaneous clothing expenses can only be written off in certain instances and as dictated by your country’s regulations. A tax deduction, for example, could be made for work clothes required for safety reasons, such as PPE, while a new wardrobe of nice dress clothes for an office job wouldn't be deemed tax-deductable.
For businesses with small advertising budgets, the costs associated with advertising can be categorized as a miscellaneous expense and may be eligible for deductions.
In most cases, advertising expenses are only deductible if they are associated with your local market. If you hire a firm based outside of your country, you may not be able to claim these advertising expenses back.
Tax deductions can be made on work-related expenses, and miscellaneous expenses like periodic publications and subscription services such as business journals or industry-related courses fall under this category.
Tools and supplies refer to items that are necessary for the operation of your services, like small tool expenses, can be categorized as miscellaneous expenses. Typically, tools with a lifespan of one year or less and that are worth less than $200 would fall under this category.
Necessary tools that cost more than a few hundred dollars and last longer than one year are generally considered capital expenses and must be considered for depreciation instead.
You may not be able to claim back the time you spent looking for the perfect employee, but you can still categorize the costs associated with finding and hiring a new employee under miscellaneous expenses. Job search costs can be considered for tax write-offs depending on your country's local regulations.
Self-employed individuals and certain salaried employees can claim back the cost of home office supplies on their income returns. As a result of the COVID-19 pandemic, most countries have updated the guidelines for claiming home office expenses as people are now working from home for some, if not all, of their working week. These guidelines will differ by country, so for more information on what can be claimed as a home office expense, be sure to check with your country's regulations.
Keep track of any fees you pay for consultants, along with fees for services from outside professionals who advise you on business matters. These accounting and legal fees may be classed as miscellaneous expenses and could be tax-deductible:
Before taking your deductions, make sure you reduce the full amount of these fees by any reimbursements you receive. You can’t deduct legal and other fees related to buying a capital property, but you can add these fees to your property cost.
Are you paying back a loan for expanding your small business? If so, most of your interest charges may be deductible as miscellaneous business expenses, including charges for any property your company has purchased. You may also receive deductions for any fees or penalties associated with a loan as well as interest on most loans you make against insurance policies.
Consider your country’s options regarding tax treatment of interest payments and amortize them over five years. In some cases, you can add your interest payments to the cost of the property involved instead of treating them as a miscellaneous business expense.
As a small business owner, there may be some restrictions, such as those on the amount of interest that’s deductible for purchases of vehicles and vacant land. If you have a home office, you can deduct interest on your home mortgage as an expense related to the business use of your home.
You may also be able to deduct all management and administration fees paid for the operation of your small business, including bank charges. If your business accepts credit card payments and pays the corresponding processing charges, tracking these miscellaneous expenses in QuickBooks makes it easier to include them when filing your tax returns.
As is the case with any other operating expense that comes with running a business, tax deductions can be made on miscellaneous expenses. Come tax season, you can write off your miscellaneous expenses in the same way you claim your other business operating costs on your tax returns.
If you are a small business owner or a self-employed person, miscellaneous expenses will have to be itemized in your taxes as you can’t just take the standard deduction for them. To ensure you have tracked all expenses and business costs throughout the tax year, consider using an accounting software with expense tracking features.
With QuickBooks Online, your business can automatically record and categorize its various expenses and customize its tax categories, like miscellaneous expenses, to ensure accurate and organized financial records. You can even claim deductions on tax preparation fees and software like QuickBooks when filing your taxes!
Come tax season, it will be easier to claim deductions and file your returns thanks to the expense tracking and automatic categorization features of QuickBooks doing the work for you. So, why not try it for free today?
