Lower Your Small Business Taxes
Lower Your Small Business Taxes
Stephen Fishman, J.D.
November 2015, 12th Edition
Reduce your taxes
Completely updated for 2015 returns!
Deduct It! shows you how to maximize your business deductions—quickly, easily and legally. Easy to read and full of real-world examples, Deduct It! will pay for itself many times over. It covers deductions for:
- start-up and operating expenses
- travel, meals and entertainment
- home offices (including new IRS rules)
- medical expenses under Obamacare
- equipment and inventory,
- and more
Deduct It! shows you how to avoid problems with the IRS, including having your business classified as a hobby. It also explains how to amend your tax return if necessary. Whether your enterprise is just starting or well established, this book is indispensable to your financial success.
Includes the top business deductions - the most valuable ones and how to claim them.
“Outlines the many deductions available to small businesses—in plain English.”-National Federation of Independent Business
“Delves deeply into the complex thicket of available deductions, with real-life examples on deducting everything.”-Accounting Today
“For more information on how to handle inventory and write off the cost of goods, see…Deduct It! Lower Your Small Business Taxes.”-San Francisco Chronicle
1. Tax Deduction Basics
- How Tax Deductions Work
- How Businesses Are Taxed
- The Value of a Tax Deduction
- What Businesses Can Deduct
- Businesses That Lose Money
2. Are You Really in Business?
- What Is a Business?
- Tax Consequences of Being a Hobbyist
- Income-Producing Activities
3. Start-Up Expenses
- What Are Start-Up Expenses?
- Starting a New Business
- Buying an Existing Business
- Expanding an Existing Business
- When Does a Business Begin?
- Claiming the Deduction
- If Your Business Doesn't Last 15 Years
- Expenses for Businesses That Never Begin
- Organizational Expenses
- Avoiding the Start-Up Tax Rule’s Bite
4. Business Operating Expenses
- Requirements for Deducting Operating Expenses
- Operating Expenses That Are Not Deductible
- Tax Reporting
5. Deducting Long-Term Assets
- What is a Long-Term Asset
- Repairs Versus Improvements: The New IRS Regulations
- Methods for Deduction Business Assets
- Deducting Inexpensive Property
- Rules for Deducting Any Long-Term Asset
- Section 179
- Bonus Depreciation
- Regular Depreciation
- Depreciation Recapture
- Tax Reporting and Record Keeping
- Leasing Long-Term Assets
- What Is Inventory?
- Deducting Inventory Costs
- Maintaining an Inventory
- Determining the Value of Inventory
7. Office Expenses
- Qualifying for the Home Office Deduction
- Corporation Employees
- Calculating the Home Office Deduction
- Simplified Home Office Deduction method
- IRS Reporting Requirements
- Audit-Proofing Your Home Office Deduction
- Deducting an Outside Office or Workplace
8. Car and Local Travel Expenses
- Deductible Local Transportation Expenses
- The Standard Mileage Rate
- The Actual Expense Method
- How to Maximize Your Car Expense Deduction
- Other Local Transportation Expenses
- When Clients or Customers Reimburse You
- Reporting Transportation Expenses on Schedule C
- Corporations, LLCs, and Partnerships
9. Business Travel
- What Is Business Travel?
- What Travel Expenses Are Deductible
- How Much You Can Deduct
- Maximizing Your Business Travel Deductions
- How to Deduct Travel Expenses
- Travel Expenses Reimbursed by Clients or Customers
10. Meal and Entertainment Expenses
- What Is Business Entertainment?
- Who You Can Entertain
- Deducting Entertainment Expenses
- Calculating Your Deduction
- Reporting Entertainment Expenses on Your Tax Return
11. Hiring Workers
- Employees Versus Independent Contractors
- Tax Deductions for Employee Pay and Benefits
- Reimbursing Employees for Business-Related Expenditures
- Employing Your Family or Yourself
- Tax Deductions When You Hire Independent Contractors
12. Retirement Deductions
- Why You Need a Retirement Plan (or Plans)
- Employer IRAs
- Keogh Plans
- Solo 401(k) Plans
13. Medical Expenses
- The Affordable Care Act ("Obamacare")
- The Personal Deduction for Medical Expenses
- Deducting Health Insurance Costs
- Tax Credits for Employee Health Insurance
- Adopting a Medical Reimbursement Plan
- Health Savings Accounts
14. Additional Deductions
- Business Bad Debts
- Casualty Losses
- Charitable Contributions
- Dues and Subscriptions
- Education Expenses
- Insurance for Your Business
- Interest on Business Loans
- Legal and Professional Services
- Taxes and Licenses
- Domestic Production Activities
15. Record Keeping and Accounting
- What Records do your Need?
- Records Required for Specific Expenses
- How Long to Keep Records
- What If You Don’t Have Proper Tax Records?
- Accounting Methods
16. Claiming Tax Deductions for Prior Years
- Reasons for Amending Your Tax Return
- Time Limits for Filing Amended Returns
- How to Amend Your Return
- How the IRS Processes Refund Claims
17. Staying Out of Trouble With the IRS
- What Every Business Owner Needs to Know About the IRS
- Ten Tips for Avoiding an Audit
18. Help Beyond This Book
- Secondary Sources of Tax Information
- The Tax Law
- Consulting a Tax Professional
Your Tax Deduction Companion
Few of us ever test our powers of deduction, except when filling out an income tax form.—Laurence J. Peter
If you are truly serious about preparing your child for the future, don’t teach him to subtract—teach him to deduct.—Fran Lebowitz
Anyone who runs a business knows that you have to spend money to make money. This book will show you how to get some of that money back, in the form of tax deductions.
A tax deduction is money on which you don’t have to pay income taxes. The government has decided that business owners don’t have to pay tax on income they spend for certain business purposes. So, the trick to paying lower taxes—and keeping more of your hard-earned dollars—is to take advantage of every tax deduction available to you.
That’s where this book comes in. It shows you how you can deduct all or most of your business expenses from your federal taxes. This book is not a tax preparation guide—it does not show you how to fill out your tax forms. By the time you do your taxes, it may be too late to take deductions you could have taken if you had planned the prior year’s business spending wisely and kept proper records. Instead, this book gives you all the information you need to maximize your deductible expenses—and avoid common deduction mistakes. You can (and should) use this book all year long, to make April 15 as painless as possible.
This book is for anyone who is in business, including:
- self-employed businesspeople
- sole proprietors (who own a one-person business)
- professionals who own their own practice, such as doctors, dentists, and (even) lawyers
- those engaged in a part-time or sideline business
- independent contractors
- owner-employees of small corporations
- partners in business partnerships, and
- members of limited liability companies.
This book applies only to those who own their own businesses. If you are an employee of a business you do not own, this book does not cover your situation. This book also does not apply to government employees.
Business owners live in a different tax universe from wage earners—those who work in other people’s businesses or for the government. Wage earners have their income taxes withheld from their paychecks and can take relatively few deductions. The vast majority of small business owners—about 80%—are sole proprietors who have no taxes withheld from their earnings and can take advantage of a huge array of tax deductions available only to business owners.
In order to take advantage of the many tax deductions available to business owners, you’ll have to figure out which deductions you are entitled to take and keep proper records documenting your expenses. The IRS will never complain if you don’t take all the deductions you are entitled to—and it certainly doesn’t make a point of advertising ways to lower your taxes. In fact, the majority of small businesses miss out on many deductions every year simply because they aren’t aware of them—or because they neglect to keep the records necessary to back them up.
Even if you work with an accountant or another tax professional, you need to learn about business tax deductions. No tax professional will ever know as much about your business as you do. And, you can’t expect a hired professional to search high and low for every deduction you might be able to take, especially during the busy tax preparation season. The information in this book will help you provide your tax professional with better records, ask better questions, obtain better advice—and, just as important, evaluate the advice you get from tax professionals, websites, and other sources.
If you do your taxes yourself (as more and more small business owners are doing, especially with the help of tax preparation software), your need for knowledge is even greater. Not even the most sophisticated tax preparation program can decide which tax deductions you should take or tell you whether you’ve overlooked a valuable deduction. This book can be your guide—providing you with practical advice and information you need to rest assured that you are not missing out on valuable deductions.