Deduct It! Lower Your Small Business Taxes

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Table of Contents......Page 9
Introduction: Your Tax Deduction Companion......Page 15
1. Tax Deduction Basics......Page 19
How Tax Deductions Work......Page 20
How Businesses Are Taxed......Page 22
The Value of a Tax Deduction......Page 27
What Businesses Can Deduct......Page 31
2. Beating the Hobby Loss Rule......Page 35
What Is a Business?......Page 36
Tax Consequences of Being a Hobbyist......Page 46
Income-Producing Activities......Page 47
3. Start-Up Expenses......Page 57
What Are Start-Up Expenses?......Page 58
Starting a New Business......Page 59
Buying an Existing Business......Page 62
When Does a Business Begin?......Page 63
How to Deduct Start-Up Expenses......Page 66
Expenses for Businesses That Never Begin......Page 70
Organizational Expenses......Page 72
Avoiding the Start-Up Tax Rule’s Bite......Page 73
4. Business Operating Expenses......Page 75
Requirements for Deducting Operating Expenses......Page 76
Operating Expenses That Are Not Deductible......Page 84
Tax Reporting......Page 86
5. Deducting Long-Term Assets......Page 87
Long-Term Assets......Page 89
Section 179 Deductions......Page 93
Depreciation......Page 105
Tax Reporting and Record Keeping for Section 179 and Depreciation......Page 130
Leasing Long-Term Assets......Page 132
6. Inventory......Page 137
What Is Inventory?......Page 138
Deducting Inventory Costs......Page 141
Maintaining an Inventory......Page 144
Determining the Value of Inventory......Page 145
7. Office Expenses......Page 151
Qualifying for the Home Office Deduction......Page 152
Corporation Employees......Page 164
Calculating the Home Office Deduction......Page 167
IRS Reporting Requirements......Page 179
Audit-Proofing Your Home Office Deduction......Page 181
Deducting an Outside Office or Workplace......Page 183
8. Car and Local Travel Expenses......Page 191
Deductible Local Transportation Expenses......Page 192
The Standard Mileage Rate......Page 203
The Actual Expense Method......Page 207
How to Maximize Your Car Expense Deduction......Page 227
When Clients or Customers Reimburse You......Page 231
Reporting Transportation Expenses on Schedule C......Page 232
Corporations, LLCs, and Partnerships......Page 233
9. Business Travel......Page 239
What Is Business Travel?......Page 240
What Travel Expenses Are Deductible......Page 247
How Much You Can Deduct......Page 249
Maximizing Your Business Travel Deductions......Page 264
How to Deduct Travel Expenses......Page 266
Travel Expenses Reimbursed by Clients or Customers......Page 269
10. Meal and Entertainment Expenses......Page 271
What Is Business Entertainment?......Page 272
Who You Can Entertain......Page 273
Deducting Entertainment Expenses......Page 274
Calculating Your Deduction......Page 279
Reporting Entertainment Expenses on Your Tax Return......Page 285
11. Hiring Workers......Page 287
Employees Versus Independent Contractors......Page 288
Tax Deductions for Employee Pay and Benefits......Page 292
Reimbursing Employees for Business-Related Expenditures......Page 301
Employing Your Family or Yourself......Page 306
Tax Deductions When You Hire Independent Contractors......Page 317
12. Retirement Deductions......Page 321
Why You Need a Retirement Plan (or Plans)......Page 322
Individual Retirement Accounts—IRAs......Page 327
Employer IRAs......Page 331
Keogh Plans......Page 334
Solo 401(k) Plans......Page 335
13. Medical Expenses......Page 339
The Personal Deduction for Medical Expenses......Page 340
Deducting Health Insurance Premiums......Page 341
Adopting a Medical Reimbursement Plan......Page 349
Health Savings Accounts......Page 358
14. Additional Deductions......Page 375
Advertising......Page 377
Business Bad Debts......Page 379
Casualty Losses......Page 385
Charitable Contributions......Page 389
Clothing......Page 390
Dues and Subscriptions......Page 391
Education Expenses......Page 392
Insurance for Your Business......Page 395
Interest on Business Loans......Page 397
Legal and Professional Services......Page 402
Taxes and Licenses......Page 403
Domestic Production Activities......Page 407
15. Record Keeping and Accounting......Page 413
Basic Record Keeping for Tax Deductions......Page 414
Records Required for Specific Expenses......Page 427
How Long to Keep Records......Page 440
What If You Don’t Have Proper Tax Records?......Page 441
Accounting Methods......Page 442
Tax Years......Page 450
16. Claiming Tax Deductions for Prior Years......Page 451
Reasons for Amending Your Tax Return......Page 452
Time Limits for Filing Amended Returns......Page 455
How to Amend Your Return......Page 458
How the IRS Processes Refund Claims......Page 460
17. Staying Out of Trouble With the IRS......Page 461
What Every Business Owner Needs to Know About the IRS......Page 462
Ten Tips for Avoiding an Audit......Page 469
18. Help Beyond This Book......Page 477
Secondary Sources of Tax Information......Page 478
The Tax Law......Page 485
Consulting a Tax Professional......Page 491
Index......Page 495