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In doing some research for Outright, our simple online accounting software application, we came across a great report in The Small Business Economy for Data Year 2006: A Report to the President. In it, there was a very interesting table outlining total business deductions for non-farm sole proprietors for the 2004 tax year (more than 20.59 million returns filed.) The top 3 were not very surprising: "Cost of sales and operations" accounted for almost 42% of all deductions (the vast majority of which were purchases), followed by "Other business expenses" at 11% and then
"Salaries and wages" at 8%.
But the next cluster of deduction categories were of much more interest:
- "Car and truck expenses" came in at #4 with 6.6% of all deductions. How much is 6.6%? Try $59 Billion!
- At #5 comes "Depreciation", accounting for 4.8% of deductions (or $42.9 Billion)
- The next two slots go to "Rent on other business property" and "Supplies". But coming up close behind is "Contract labor", where these businesses spent $24.7 Billion! That, my friends, is a lot of 1099s!
I highly recommend that anyone who provides products or services to very small business read this report - it's a very good summary of a lot of government statistics.
