25 Feb Determining Whether Your Purchase is a Business Expense
Tax season is coming into full swing, and the IRS has now started accepting returns from small and medium businesses as well as individuals as of February 1st. Now that you have to do your own taxes as well as your business taxes, are you sure of what you can deduct safely, and what’s going to cause a problem with the IRS if you do? If this is one of your first years doing business taxes, consulting a professional isn’t a bad idea – but that doesn’t mean you shouldn’t know what you can deduct and what you can’t. Here are a few more common deductions you can and cannot claim.
Commuting expenses aren’t actually deductible if you’re just driving to and from work. They can be deductible in certain non-profit situations, however.
Fines and penalties like tickets and anything else that broke the law are also not deductible, even if they were part of a business trip or were amended.
Insurance premiums are deductible, but ONLY if your business is a registered C-Corp (hint: if you don’t know what this is, you probably aren’t one).
Memberships to country clubs and gyms are often something people think are deductible, but they aren’t unless you own the country club or gym you attend. In fact, claiming these can results in fines from the IRS.
Charitable donations from your business are deductible, but ONLY if you maintain proof and you are given a statement from your charitable organization at the end of the year stating that you contributed and if you received anything in return for your donation. If you didn’t, the statement must specifically state that, else you cannot claim your donation. You cannot claim your time as a deduction, even if you did 3,000 hours of charity work during the year.
There are tons of expenses you CAN claim, but many of those that seem to be deductible from the surface the IRS will not accept. Make sure you talk all of this out with a professional so you know that you’re getting the best care possible.
photo credit: Sufi Nawaz