What expense category is Printing Services?

In the day-to-day operations of any small to medium-sized business (SMB) or for any accounting professional managing business finances, various expenses crop up. One common, yet sometimes overlooked, category is printing services. From business cards to marketing brochures, these costs are essential. But how do you correctly classify them, what are the tax implications, and how can modern tools simplify managing these expenses?

This guide will walk you through understanding printing services as a business expense, key considerations for classification, common examples, tax implications as per IRS guidelines, and how Fyle can help automate the tracking of these expenses.

Printing Services Expense Category

Printing services encompass a wide range of materials a business might produce for operational, marketing, or administrative purposes. For tax and accounting purposes, the cost of printing services used for your business is generally considered an operating expense. These are costs that are both common and accepted in your field of business (ordinary) and helpful and appropriate for your business (necessary).

Unlike major asset purchases, most printing services do not provide a long-term benefit extending substantially beyond the current tax year, and thus, they are typically expensed rather than capitalized. Depending on the nature of the printed materials, these expenses might be classified under broader categories in your accounting system, such as:

• Advertising and Marketing Expenses: This is a common category for printed materials like flyers, brochures, and posters designed to promote your business. The IRS allows deductions for reasonable advertising expenses directly related to your business activities.
• Office Supplies or General Office Expenses: Items like business cards, letterheads, and internal forms might fall under this category.
• Other Business Expenses: This is a general category that can include various operational costs, and specific printing services might fit here if not better suited elsewhere.

Some Important Considerations While Classifying Printing Services Expenses

Correctly classifying business expenses is crucial for accurate financial reporting and tax compliance. Here are some important points to keep in mind:

Business Purpose is Key

To be deductible, the printing expense must be directly related to the conduct of your trade or business. Personal printing expenses, even if done through a business account, are generally not deductible. If a printing job has mixed (business and personal) use, only the business portion is deductible, and this allocation should be supportable.

Recordkeeping

The IRS requires businesses to keep thorough records for all expenses, including printing services. Supporting documents are essential. For printing expenses, these documents should include:

1. Invoices from the printing company.
2. Receipts or canceled checks as proof of payment.
3. A clear description of the items printed to support the business purpose.
4. The date the expense was incurred and the amount paid.
5. It's advisable to keep these records organized by year and type of expense.

Distinction from Capital Expenditures

While most printing costs are current expenses, exceptionally large-scale printing projects that result in an asset with a useful life extending substantially beyond the current year might need to be reviewed for capitalization. However, this is rare for typical printing services. For example, very durable, high-cost signage intended to last for many years could be a capital asset, whereas printed paper banners for a specific event are clearly expenses.

Clear Invoicing

Ensure that invoices from printing vendors are detailed and clearly state "printing services" along with a description of what was printed. This helps in substantiating the expense during an audit.

Allocation to Projects/Departments

For internal tracking and budgeting, businesses often need to allocate printing costs to specific projects, departments, or cost codes. While this is more for internal accounting, having a system to do this accurately helps in financial analysis.

Examples of Printing Services Expenses

Here are common examples of expenses that would fall under the printing services category for most businesses:

• Marketing and Promotional Materials:
  
  • Brochures and flyers
  • Posters and banners for advertising or events
  • Catalogs and product spec sheets
  • Direct mailers (printing costs)
• Office and Administrative Printing:
  
  • Business cards
  • Letterheads and envelopes
  • Customized business forms (e.g., invoices, purchase orders, work orders)
  • Internal reports and presentations (printing costs)
• Operational Printing:
  
  • Employee handbooks and training manuals
  • Instructional manuals for products
  • Safety information and compliance posters
• Event-Related Printing:
  
  • Signage for trade shows or conferences
  • Printed agendas or programs for events‍

Tax Implications of Printing Services Expenses

Deductibility

The costs of printing services are generally deductible as ordinary and necessary business expenses on your tax return, provided they are directly related to your trade or business. For sole proprietors, these are typically reported on Schedule C (Form 1040).

Timing of Deduction

The timing of when you can deduct printing expenses depends on your accounting method:

• Cash Method: If you use the cash method of accounting, you generally deduct expenses in the tax year you pay them.
• Accrual Method: If you use an accrual method, you generally deduct expenses when you incur the liability (the all-events test is met and economic performance has occurred), not necessarily when you pay them. Economic performance for services provided to you (like printing) generally occurs when the services are provided.

Non-Deductible Printing Expenses

• Printing for purely personal use is not deductible.
• Printing related to political campaign contributions or lobbying activities may also be non-deductible.

Sales Tax

Any sales tax paid on deductible printing services is generally considered part of the cost of that service and can be deducted along with the printing cost itself.

Recordkeeping for Tax Audits 

Maintaining adequate records is crucial for substantiating your printing expense deductions in case of an IRS audit. This includes invoices, receipts, and proof of payment. The IRS document "What kind of records should I keep?" emphasizes that supporting documents should identify the payee, amount paid, proof of payment, date incurred, and include a description of the item purchased or service received.

How Fyle Can Automate Expense Tracking for Printing Services

Manually tracking printing expenses, collecting receipts, and ensuring compliance can be time-consuming for both employees and accounting teams. Fyle’s expense management solution offers several features to automate and streamline this process:

Real-time Expense Capture

If printing services are paid for using a connected corporate credit card, Fyle's real-time feeds capture the transaction data instantly as soon as the card is swiped. This eliminates delays and provides immediate visibility into spending.

Effortless Receipt Submission and Automated Reconciliation

Employees can submit receipts for printing invoices quickly and easily. Whether it's an e-receipt from Gmail or Outlook, or a paper receipt photographed and submitted via SMS, Slack, or the Fyle mobile app, collection is simplified. This drastically reduces the time accountants spend chasing receipts.

Fyle automatically matches submitted receipts with the corresponding credit card transactions, reconciling them in seconds. This significantly speeds up the month-end closing process.

Policy Compliance

You can set up policies within Fyle related to printing expenses. For example, you can flag expenses that exceed a certain budget for marketing materials or require additional approval for large printing orders. Fyle checks for policy violations even before an expense report is submitted.

Project and Cost Center Allocation

Fyle allows businesses to allocate printing expenses to specific projects, departments, or GL codes. This is particularly useful for tracking the costs of marketing campaigns or specific client deliverables.

Seamless Accounting Integration

Fyle offers deep, two-way integrations with popular accounting software like QuickBooks Online, QuickBooks Desktop, Sage Intacct, Xero, and NetSuite. Classified printing expenses, along with their receipts, can be automatically exported, ensuring your general ledger is always up-to-date and saving considerable manual data entry.

By leveraging Fyle, SMBs and accountants can ensure that printing service expenses are accurately captured, classified, and reconciled with minimal manual effort, leading to better spend visibility and robust compliance.