Travel, Entertainment, Gift, Car Expenses & Business Use of Home Deduction

Many questions I receive from new clients are regarding deductibility of entertainment, travel, and business use of home. Here are some articles and links to IRS Publications that will help get your started. http://www.irs.gov/app/picklist/list/publicationsNoticesPdf.html and insert in the “Find” Box the Publication number you are searching for. I recommend Publication #334 “Tax Guide for Small Business”; #587 Business Use of your Home; and #463 Travel, Entertainment, Gift, and Car Expenses.

Disclaimer: This post does not constitute tax advice or financial planning advice (articles may be outdated). Please consult with your professional accountant or professional financial planner.

Importance of Recordkeeping:
http://www.unclefed.com/AuthorsRow/GretaHicks/problems.html - I like this article because it emphasizes the importance of good record keeping. Specifically, she states “The IRS presumes all assets and deductions are personal unless the taxpayer has the records to prove otherwise.”


Pub 463: Travel, Entertainment, Gift and Car Expenses:

http://www.irs.gov/pub/irs-pdf/p463.pdf

A few pages from Pub 463 I wish to highlight:

Pg 10 and Pg 11 – See Table 2-1 “When are Entertainment Expenses Deductible” and Figure A “Does the 50% Limit Apply to Your Expenses”

Pg 13 – See “What Entertainment Expenses are (generally) not Deductible.

Pg 25 – See Recordkeeping requirements.

A few articles that may interest you:

http://ezinearticles.com/?Small-Business-Deductions---How-to-Drive-the-IRS-Crazy&id=135944 - An article regarding the Vehicle deduction

http://www.yousaveontaxes.com/tax-tidbit-3.html - An article regarding use of the Per Diem method – there are other “tax tidbit” articles included here that may be of interested to you.


Pub 587: Business Use of Your Home:

http://www.unclefed.com/Tax-Help/irs-tt/tc509.html - An article written about claiming the Business Use of Home deduction.

Here is the Link to Publication # 587 Business Use of Home
http://www.irs.gov/pub/irs-pdf/p587.pdf


A few pages from Pub 587 I wish to highlight:

Pg 4 figure A – Use this diagram to see if you qualify to claim the business use of your home deduction.

Pg 7 – See how a typical deduction is calculated. This will help you start gathering the information needed to calculate your deduction.

Pg 14 and 15 – This describes how you may be required to recapture prior business use of home deduction (depreciation related deductions) when you sale your home.

DISCLAIMER: Information provided is not intended for use as accounting, tax, or legal advice; rather, consult with a professional.

IRS Circular 230 requires that we inform you that the advice contained herein is not intended to be used, and it cannot be used, for the purpose of avoiding penalties that may be imposed by the IRS.

Tax Planning for Small Business Owners Article

I like the message in this dated article "Tax Planning for Small Business Owners" because it reminds tax payers of the importance of tax planning. Unfortunately, I can speak from personal experience regarding the importance of tax planning. One tax year I found myself pushed into an AMT bracket with only one tax savings option (not the preferred option) available to me. Had I sat down prior to the tax year's end, I would have had a more attractive option.

I encourage you to read through the article (keeping in mind it is dated) to inspire you to make time for tax planning before it is too late (i.e. at the end of your tax year). I have provided the link to the article below and a link to current tax rates should you do you own tax planning. Regardless of whether you do it yourself or hire a tax professional, you can use the following 6 goals described in the article to frame your tax planning questions to your tax professional.

Article Excerpt:
There are countless tax planning strategies available to a small business owner. Some are aimed at the owner's individual tax situation, and some at the business itself. But regardless of how simple or how complex a tax strategy is, it will be based on structuring the strategy to accomplish one or more of these often overlapping goals:
1. Reducing the amount of taxable income
2. Lowering your tax rate
3. Controlling the time when the tax must be paid
4. Claiming any available tax credits
5. Controlling the effects of the Alternative Minimum Tax
6. Avoiding the most common tax planning mistakes

http://www.cpasitesolutions.com/content/articles/taxplanningforbo.htm

http://taxes.about.com/od/2009taxes/qt/2009_tax_rates.htm (see tax rates)


Happy Tax Planning,

Eura Tunstall, CPA
http://www.euratunstall.com/

Disclaimer: This blog does not constitute tax or finacial planning advice rather consult your professional tax professional and/or financial planner.

IRS circular 230 requires that I inform you that the advice contained herein is not intended to be used, and it cannot be used, for the purpose of avoiding penalties that may be imposed by the IRS.

Retire Early / Work Less, Live More

Two books that I enjoyed and recommend to those thinking of early retirement or semi-retirement are as follows: “How to Retire Early and Live Well With Less Than A Million Dollars” by Gillette Edmunds (www.theretiredinvestor.com) and “Work Less, Live More” by Bob Clyatt (http://www.workless-livemore.com/).

Edmunds’ book “How to Retire Early and Live Well” is an easy read and uses investment strategies employed by pension funds and translates those strategies in laymen terms. In fact, he exposes some of the myths that even I (a CPA) fell for!!!!! Edmunds also stresses the importance that you need to learn about investing rather than relying soley on others.

Clyatt’s book “Work Less, Live More” may bring out the bohemian in you. Let me warn you, if you are FED UP at work, this book may push you over the edge. Perhaps your desk will be empty early next Monday as you i-phone your resignation letter from the Fiji Islands!

I hope that these books provide you a nugget (or more) of insight about your financial future. Enjoy the books and good luck on reaching your financial goal.


Eura Tunstall, CPA
http://www.euratunstall.com/

Disclaimer: This post does not constitute tax, financial planning or legal advice. Please consult with your professional tax preparer or financial planner.

IRS Circular 230 requires that I inform you that the advice contained herein is not intended to be used, and it cannot be used, for the purpose of avoiding penalties that may be imposed by the IRS.