Be sure to deduct every legitimate expense
Amounts you spend in the course of conducting busi-
ness are generally deductible from the gross income
of that business. This includes any start-up ex-
penses. You can claim amounts spent for items
ordinary and necessary in your trade or busi-
ness as a deduction against your income.
Otherwise, the amounts are amortized, de-
preciated, or expensed depending on the
nature of the purchases.
The IRS scrutinizes entertainment and
meal expenses more than others be-
cause of the potential for abuse.
You’ll need to keep track of the busi-
ness that was discussed during
these events. Other expenses such
as cellular phones, computers, and
cars are specially classified as
listed property because they can
be used for both personal use and
business use. The IRS requires
you to keep written documentation
of the business use of your car and
computer, plus meals and enter-
tainment expenses, so be sure to
keep accurate records.
Expenses must be directly related to
your trade or business to qualify as a
deduction; amounts spent on items that
may help you indirectly do not nec-
essarily qualify. However, to increase your
profit, be sure to deduct every legitimate
expense that you can reasonably prove. Take
advantage of your tax preparer’s expertise
throughout the year to assist you with tax plan-
ning opportunities as they arise.
Summer 2008 For Small Business
Fred Form, Accountant
2950 Hempstead Turnpike
Levittown, NY 11756
(516) 735-0500 Call Us!
Which is better—deducting the standard mileage rate
or actual expenses?
With the increasing cost of gas, it might be a good idea to revisit
which tax deduction is the most beneficial—claiming 50.5 cents
per business mile or your actual vehicle expenses. Claiming the
standard mileage rate is easier. All you have to do is keep track of
your business miles and multiply them by the current rate. In