In December 2018, Intuit surveyed “receipt and expense challenges of business owners,” in the United States. Intuit, a business and financial software company based in the United States, develops and sells financial, accounting, and tax preparation software and related services for small businesses, accountants, and other individuals.
The study received overall 500 responses among the age groups of 18 -24 (18.4%), 25 -34 (19.2%), 35 -44 (19.2%), 45 -54 (19.2%), > 54 (24.0%), from both men (44%) and women (56%) residing in the United States. Among the overall 500 participants of the study, 40% were recorded to be business owners, whereas 60% were registered to be self-employed.
Business Owners and Their Challenges with Receipt and Expensing Tax
According to the survey report from QuickBooks, 325 participants, that is 65%, had the highest number of employees, which was anywhere between one and five, whereas 62 participants, that is 12.40%, had six to ten employees, and only 17 participants, that is 3.40%, had eleven to fifteen employees.
Owing to the business expenses available for deduction, the percentage of expenses they deduct from their taxes each year is 15.20% by 76 people, which is the highest among all, 7.80% by 39, 10.20% by 51, 6.80% by 34, 4.60% by 23, 9.40% by 47, 8.60% by 43, 11.20% by 56, 10.60% by 53, 6.60% by 33, 9.00% by 45 participants.
Factors for not expensing 100%
As per the report, when inquired about why they don’t expense 100% of their business expenses, the major concern was people’s unawareness about the tax expenses.
Of the 41.4% (that is 174) respondents 32.16% were not completely sure what can and cannot be expense, followed by, the other concerns noted were; not remembering all of their expenses 118, loss of receipts by 94, forgetting to ask for receipts by 70, believing that their accountants couldn’t identify everything they should deduct by 46, whereas 39 participants expressed other reasons.
Expensive Items that were Purchased but couldn’t be Expensed
Some of the items that were purchased by these participants for their businesses or work purposes were fairly expensive, but they couldn’t expense the items due to loss of receipts. On average, people lost receipts of items worth about USD 200. The receipts lost by these participants, for some of the most expensive items were registered to be valued at UDS 10,135.31, which is a lot of unclaimed money.
Additionally, the most notable strangest items deducted from their taxes were recorded to be pets and related expenses, including dog, horse, donkey, duck, and farm animals, and their related expenses include dog food and goat medicine. Some also went as far as deducting tax for dog walking, and inflatable items. The other bizarre expense was noted to be a college education, lotto and NBA tickets, gambling losses, and toilet paper/bathroom expenses, among others.
As per the estimations of the report, about USD 5,505 is the mean value of the overall participants who miss out on each year from unclaimed expenses, and the median and mode values were recorded to be USD 500 each, among the participants. This means the participants who missed out on most of the money were registered to be the highest, resulting between 50% to 55%.
Safeguarding the Business Receipts
When it comes to keeping their business receipts safe, the highest percentage of respondents preferred to place their business receipts in a physical folder specifically for receipts (40.80%), as well as in the office (33.20%). The other preferred places were shoe box (14.40%), bag, purse, or wallet (12.20%), and in their car (7.80%).
Some respondents were also noted to store their bills digitally, on a computer desktop (12.40%), using an app (6.20%), and on their phones (4.20%), whereas the remaining participants (4.60%) used other sources to retain their receipts safely.
This proves that the majority of business owners are moderately organized, which is revealed in the report, that 61.80% of respondents claimed they were somewhat organized and could be better, whereas only 20.40% of them claimed to be very organized with no room for improvement, and contrarily, 17.80% claimed to be very disorganized and could be a lot better.
Challenges Faced in Retaining Business Receipts
These business owners, or self-employed individuals face certain challenges in retaining the business receipts. The most challenging factors were noted to be: not knowing an easier way to keep track of business receipts, not knowing for how long they need to keep the receipts, and accidentally mixing personal with business receipts, among various others.
Moreover, the most important reason they kept the purchase receipts was to use them in case they want to return any purchase. Also, more than half of these individuals (51.20%) showed no concern at all about being audited.
Stress in Tracking and Organizing Business Expenses
While tracking business expenses, a moderately high number of individuals felt stressed. By the level of stress, as per the report, about 26.60% (133) individuals were recorded to be occasionally (a few times a year) stressed, 20.60% (100) were regularly (once every two to three months) stressed, 13% (65) were often (more than once a month) stressed.
In contrast with that, 17.20% (86) were registered to be rarely (once a year) stressed, 10.40% (52) were rarely (less than once a year) stressed, and 12.80% (64) were never stressed.
In addition to tracking, people also experienced stress about organizing their business expenses. A vast number of respondents (42%) revealed they experienced a mild amount of stress, however, a large group of individuals (30.20%) also revealed that they do not experience much stress. A large number of individuals also liked the idea of never having to track their business receipts ever again, by replacing them with something else.
Conclusion
The report concludes that the loss of business receipts and keeping track of receipts are the major concerns, which are further expected to continue among business owners and self-employed individuals unless they find user-friendly solutions that make their struggle easier, an app or software perhaps.
Image source: Freepik Premium
