From travel expenses to paying wages to family members, there’s no limit to what people will try to write off at tax time for the sake of their business. But where do you draw the line? Which write-offs you’re trying to write off go too far?
Tax Write-Off: Personal Expenses
This is a category business owners can easily get into trouble with if they’re not careful.
Key Issue: You simply can’t deduct services of a purely personal nature that aren’t related to your business.
How to Do It Right: Getting an opinion from a tax professional as to whether an expense is deductible for your business makes most sense. The cost of high-speed internet service should be deductible but you can’t deduct such homecare services as gardening, landscaping and tree removal simply because you work out of a home office.
Tax Write-Off: Guard Dog
Believe it or not, this is a legit write-off if taken correctly. In order for a dog to qualify as your company’s guard dog, it helps if you’re a little afraid of the animal yourself (picture a Rottweiler, Pit Bull or German Shepherd).
Key Issue: You will only be able to deduct that portion of the dog’s total time devoted to “guard-dog” duty.
How to Do It Right: Though it may seem rather obvious, your dog most also be guarding your inventory. Knowing the percentage of time devoted to guard-dog duty, applying this business use percentage you can deduct expenses relating to the dog but you can’t deduct the dog itself. You can however depreciate the dog over its expected lifespan as determined by a local breeder.
Tax Write-Off: Work-Related Uniforms or Costumes
The dos and don’ts of this tax write-off are fairly simple.
Key Issue: If the costume or uniform is something you could wear outside your job, you shouldn’t write it off. If, however, it’s obvious you can only wear it for the duties of your specific job, then it qualifies as a write-off.
How to Do It Right: A new suit wouldn’t qualify since you can wear it other places outside of your work environment. A perfect example of some rather unusual clothing you can write-off would be a clown suit. Even a Las Vegas showgirl with tight, sequined costumes she purchased for her performances should qualify. In this case a picture is worth a thousand words.
Tax Write-Off: Paying Wages To Family.
When employing a spouse, child or close relative, be careful not to give them any extra-special treatment.
Key Issue: Make sure the responsibilities of their job description are commensurate with their age and experience. Pay them the same salary you’d pay anyone else doing the same job.
How to Do It Right: Just like any other employee, maintain a personnel file and include them on your worker’s compensation coverage. Report them on the business’ employment tax returns and issue W-2’s at the en of each year.
What Should You Do?
Protect yourself. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Diego San Francisco and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.
Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems to allow you to have a fresh start.