By month: June 2006
The one-owner or husband-and-wife owned businesses can gain significant income by learning how to reduce the largest expense they pay during their lifetimes (taxes). In this respect, the self-employed are both cursed and blessed. Cursed because they pay a larger percentage of their net income in taxes than anyone else in the country. Blessed with business deductions that, when used properly, not only balance their taxes with those of the average employee, but actually mean (if they are paying attention) that they pay a whole lot less.
This taxpayer won his deduction for going to the library located 36 miles away from his home and next to his parent’s home. The IRS lost its argument that the taxpayer should have used the library near his home rather than drive 36 miles to the library where he also could visit with his parents.
Say you are going to buy a replacement SUV that qualifies for Section 179 expensing. Should you trade your old vehicle or sell it outright? The selling outright strategy can save self-employment taxes. Many Schedule C taxpayers pocket thousands with this little-known strategy.
When you lose your tax records for any reason—including floods, theft, hurricanes, and earthquakes—you will find that the tax law grants no mercy to your lost records. You simply have the right to substantiate your deductions using a reasonable reconstruction of those records.
The IRS fulfilled its promise and audited twice as many Form 1040-Schedule C taxpayers and S corporation returns. Your odds of audit vary by both choice of entity and gross receipts in that entity.
When you operate your business as a corporation, you need to reimburse the business use of the personal car as a reimbursed employee expense. The corporation may use either the IRS mileage method or the actual expense method for the corporate reimbursement to the employee-owner.
When you operate your business as a corporation, you claim the office-in-the-home deduction as an employee. The law requires that this employee use be for the convenience of the employer. Generally, you want the convenience of the employer reason in writing.
When you have your corporation reimburse your home office as an employee business expense, you treat the home as if you had claimed the office-in-the-home deduction personally.
The corporate reimbursement of the owner-employee for office-in-the-home expenses includes condo fees and mortgage payments.
Many sporting events qualify for a 100 percent entertainment deduction rather than the traditional 50 percent. This is true for both participants and spectators. To qualify for the 100 percent entertainment deduction, the net proceeds of the event must go to charity—as they do in a PGA Tour golf tournament.