Have you ever heard of this? A business deduction must be ordinary and necessary. Well that narrows it down doesn’t it? If you’re looking for tax deductible business expenses then you have come to the right place.
Business Deductions
I could compile a huge long list but, I won’t. If you want the huge long list you can consult the publication from the IRS called Pub 535. I’ll save you the agony of reading boring material in this article.
You have to use some common sense when it comes to business deductions. The cost of a trade or business is a business deduction. It must be common and accepted by the IRS to qualify as a real deduction. Don’t try to pull the wool over their eyes because they’re cracking down on that sort of stuff.
Business Expenses
Every business has expenses. Maybe you spent money on software, computers, or travel out of your own pocket. If you have an incorporated business, deducting expenses will reduce your business taxes. If you happen to be a sole proprietor, being able to deduct expenses will reduce both the regular income tax and the self-employment tax.
Keeping Accurate Records
Keep your receipts for your business deductions, even if you’re not sure if it’s a legitimate deduction or not. I have a separate file for each month. If you keep accurate records as you go along it will be so worth it when it’s time to file your tax return. A lot of business owners use Quickbooks, Quicken, or Microsoft Money.
It really doesn’t matter what you use as long as you keep accurate records of every expense. I know of a couple who still will use a spiral binder and they enter their date the old fashioned way. You may laugh but, it works.
Audit Alert
Did you know a home based business that reports expenses for business use of the home is more likely to trigger an audit by the IRS than other, similar business owner? Wouldn’t you like to know what the audit triggers are?
Well I have good news for you. Turbo Tax Online has a feature called Audit Alert. How wonderful is this? Turbo Tax will scan your return for any audit triggers. They have an easy to read audit risk meter and will alert you if they find anything that needs correcting.
They will help you with any corrections and provide step by step guidance. Try TurboTax Online today to discover even more benefits!
The audit alert by TurboTax is pretty cool. I’m pretty sure they calculate your audit risk based on what forms you fill out, what your income is relative to last year’s, etc., but still it’s nice to have some sort of baseline.