These are some of the biggest deductions that are often overlooked when small businesses prepare their tax return. They can provide huge benefit for increasing deductions and saving you taxes.
Increase Entertainment Expenses
An interesting way to save on taxes, that can be fun as well as rewarding, is to deduct entertainment expenses. Entertainment expenses are great deductions to add to your income statement and can save you money, however there are some important guidelines to think about when including them on your return.
In order to qualify, business must be discussed before, during, or after any meal deducted. The surroundings must be conducive to business discussion. For instance, a small restaurant would be an ideal location for a business dinner or meeting. Prime distractions are theaters, ski trips, golf courses, sports events, and hunting trips.
The IRS allows up to a 50% deduction on entertainment expenses. Good documentation of these expenses is required in order for the IRS to consider these deductions. Remember that the business meal must be arranged with the purpose of conducting specific business.
Automobile Deductions
An automobile is a big expense, especially for those of you who own more than one. The mileage reimbursement rates for 2009 are 55 cents for business, 14 cents for charitable and 24 cents for moving/medical miles. For the first half of 2008, the mileage reimbursements rates are 50.5 cents per business mile, 14 cents per charitable mile, and 19 cents per moving/medical mile. For the second half of 2008, the mileage reimbursements rates are 58.5 cents per business mile, 14 cents per charitable mile, and 27 cents per moving/medical mile.
If you own more than one car, another common way to increase deductions is to include both cars as a deduction. This is possible since the business miles driven determine business use. To figure business use, divide the business miles driven by the total miles driven. You can do this for each car driven for the business and can bring significant deductions.
This is simply a wonderful way to save, but remember, in order to be effective, a consistent mileage log should be kept. Consider meeting with a CPA to determine the most efficient way of tracking mileage and other costs.
Home Office Deduction
There are so many tax advantages to having a home office it becomes worth the navigational trouble. Here are a few common tips for home office deductions that can make tax season significantly less traumatic for those of you with a home office.
The IRS wants you to support these expenses. Try prominently displaying your home phone number and address on business cards, have business guests sign a guest log book when they visit your office, deduct long-distance phone charges, keep a time and work activity log, retain receipts and paid invoices.
Section 179 deduction allow you to immediately expense, rather than depreciate over time, up to $133,000 in 2009 worth of qualified business property that you purchase during the year. The key is “purchase” …it can be new or used. All home office depreciable equipment meets the qualification. Also, if you purchase more than $133,000 in equipment, you can expense the first $133,000 then depreciate the rest.
Make sure that before you start deducting all of these items on your return, that you have qualified for the Home Office Deduction. You should consider meeting with a CPA or Tax Accountant for further Home Office Deduction advice.
Lawrence & Associates, Huntington Beach CPA & Accountant
Huntington Beach Bookkeeping/Huntington Beach Tax Preparation