A 2020 Tax Guide for Process Servers

Filing taxes can be difficult for both process serving businesses and process servers operating as independent contractors, especially the first time. In this article we’ve pulled together a guide with tips, deduction, and general information to help you get through this year’s tax season.

Plan Ahead

Getting ready for your taxes should ideally start before tax filing season is upon you. Here are some tips for things to do before it’s time to put pen to paper.

• Stay Organized: Having everything organized such as receipts, invoices, and financial statements, will prepare you better and it will make the tax burden process a little less painful. Consider investing in accounting software such as Quickbooks or Xero as they are helpful with staying efficient and keeping business financials in order. In addition, your case management system, such as Process Server’s Toolbox (PST), should have some accounting features to help process servers stay organized during the year. For example, PST has features to track of income/revenue, cash receipts, invoicing, client payments, server payments, server payables, and accounts receivables. Remember that time is money. The last thing you want is a box full of mixed paperwork and crumpled receipts that may result in a hefty accounting bill.
• Hire an Accountant: While it may seem like filing taxes on your own is the better option in terms of cost, you could potentially miss out on deductions you’re entitled to. Filing your taxes with an experienced accountant also reduces the risk of making costly errors on your taxes. Working with a professional is the best option to ensure you are following all the rules and maximizing all of your deductions. Finally, an accountant can help you make the most cost-effective choices in terms of your business and the acquisition of major assets (buy versus lease) and the timing of those acquisitions, which will save you money long term.
• Track Your Mileage: For process servers, mileage is a substantial tax deductible. The IRS has standard mileage rates for self-employed individuals who use their vehicles for business. Make sure you track your miles properly so you can claim full deduction. Per the IRS website, the mileage rate for 2020 is 57.5 cents per mile!

Know Your Deductions

Whether you are a process serving company running as a small business or an independent contractor, it is important to know all your possible deductions. Here we’ve compiled a list of business related items that you may claim on your taxes to help you keep more of your hard-earned working dollars. As always, consult with a professional for these deductions.

• Vehicle Mileage: As mentioned previously, your mileage is a substantial tax deductible. Make sure you keep a good record of your daily miles, allowing you to claim potentially thousands of dollars in taxes. Mile IQ is a mileage app to consider, as well as Hurdlr and Simply Auto.
• Home Office: If you have a home office that you use to run your business, you may be able to deduct expenses for the business use of your home. Here is the IRS Home Office Deduction parameters for detailed information.
• Office Rent: If you rent office space designated for your process serving business, you can fully deduct the rent payment made throughout the year.
• Office Supplies: Office supplies are the traditional office items that are consumed when used, such as paper, pens, paper clips, staplers, printer ink, sticky notes, etc. It also includes janitorial cleaning supplies, bathroom tissue, hand soap, paper plates, paper towels, and everything purchased for the employee breakroom or office kitchen. You can fully deduct the expenses for all of these.
• Office Equipment: Office equipment are office items that are used over and over and usually are depreciated over time. Examples include printers, desktop computers, laptops, and office furniture. As you make these purchases, keep track of your receipt as they qualify for tax deductions as well. 
• Office Software: With the rise of technology, we have become more of a digital world. Even process servers have incur software expenses. Keep track of all software expenses for full deduction benefits.
• Utilities: Office electricity, phone service, cell phones (used for business), and internet connectivity are some of the most common utility business bills that qualify for tax deductions. Keep your utility invoices together and organized throughout the year so you have them ready for tax season.
• Payroll: If you have employees or independent contractors, their payroll is fully deductible.
• Association Membership Dues: If you are a member of NAPPS or any of the state associations, such as FAPPS, NYSPPSA, or TPSA, make sure you keep receipts that proved you paid your dues because they are tax deductible! One more reason as to Why You Should Join!
• Marketing Expenses: Business marketing can be an expensive investment. However, you can increase your return of investment even more by deducting those expenses. Marketing expenses you can deduct include business cards, brochures, social media ads, sponsorship, and online directory listings. You can also deduct the expenses paid for swag items you give away at process server’s conferences: pens, letter openers, t-shirts, coffee mugs, etc. as well as the conference registration cost.
• Education and Licenses Fees: If you live in a state that requires you to take an annual education class to renew your process serving license, such as Florida, keep track of all those fees because they are deductible. Any money you spend towards a class or seminar that is directly related to your process server profession is a deductible expense.
• Tolls: If you encounter many tolls while driving around to do your job as a process server, the good news is you can deduct those expenses. A simple way to do this is to purchase a pre-paid toll device, such the SunPass for Florida or the TxTag for Texas. Login into your account and run a statement of everything you paid the previous year. This would eliminate the hassle of saving receipts every time you pay for tolls.
• Business Travel Expenses: If you attend process serving conventions and incur travel expenses, hold on to those receipts because they are tax deductible. Keep track of your plane tickets, taxi, Uber or Lyft, hotels, and meals to maximize all of your travel expenses deductions.

Final Thoughts

While you can incur a lot of expenses as a process server, you are also eligible for a significant number of tax deductions, so it is very important to keep track and stay organized with all your expenses during the tax year. Take full advantage of the tax deductions available for you by developing a strategy that will help you stay organized and tax ready all the time. This will make the process less dreadful and cost efficient.

Disclaimer: The information provided by Database Services, Inc. in this article is for general information purposes only. All information is provided in good faith and it shall not be substituted for professional tax advice or legal advice. As always, consult with a tax advisor, CPA, or attorney before filing for these deductions.