As CPA’s it is our job to save you tax dollars and inform you of opportunities available to do just that. This article provides some insight on tax deductions that are available that business owners may overlook.
$25 Holiday Gifts To Associates
Holiday gift are often overlooked when preparing tax returns. Whether you are an employee, a self-employed individual, or even a shareholder-employee in your own company, you can deduct the cost of gifts made to clients and other business associates as a business expense. The limit of the deduction is set at $25 in value for each recipient for which the gift was purchased with cash.
The Tax Court has allowed an independent salesperson to deduct gifts to buyers, even though the buyers’ employers prohibited the acceptance of such gifts. The Tax Court felt the gifts were not bribes but were a legitimate business expense. Because the gifts were small, less then $25 but totaling more than $3,000, the taxpayer was not required to keep receipt as proof. The entries in the salesperson’s journal was acceptable proof.
Can You Deduct Your Computer at Home?
There is an opportunity for saving more on your income tax return for individuals who purchase a computer and use it for work-related purposes at home. A Tax Court ruling a few years ago may give you a tax deduction on your computer you use at home. If you are an employee and want to deduct your computer, you first have to meet the requirement stating that the computer is used for convenience and as a condition of your employment. As a result of the Tax Court ruling, if your employer limits your access to a computer at work for security reasons but still requires that the work be completed, then you can deduct the portion of the cost of your computer that is allocable to business use.
Get Dinner From Your Boss
Lets say you are in a partnership or are a shareholder-employee in a regular C or S corporation, and you have to work overtime. In this unfortunate event, your company can, on occasion, provide you with dinner. The cost of such a dinner is 100% deductible for your company, and you don’t even have to pay personal income tax on the value of the meal.
And on top of this, your company does not have to provide this fringe benefit to other employees who are working late. But your company does not have to directly pay you for the meal. Instead, it can provide you with supper money and in order for this to pass IRS scrutiny, the amount of dinner money has to be reasonable. If the IRS decides that the amount of money you received was unreasonable, the whole amount will be considered taxable personal income and will not be deductible.
We will be glad to answer your questions concerning deductible dinners and any other questions you have, so call today so we can help you start with this Section 132 “de minimis” fringe benefit.
Lawrence & Associates, Huntington Beach CPA & Accountant
Huntington Beach Bookkeeping/Huntington Beach Tax Preparation