422 Tax Deductions for Businesses and Self Employed Individuals
Quick Skim
Tax season may have just ended but you should already be thinking and preparing for next April’s tax bite. In fact, a little thinking ahead might save you hundreds of dollars or more. After all, you likely didn’t deduct everything that you could have in your last tax filing. CPA Bernard B. Kamoroff, author of 422 Tax Deductions for Businesses and Self-employed Individuals (Bell Springs Publishing, 2008), provides an alphabetical list of hundreds of tax deductions for small businesses, from the common to the obscure. You owe it to yourself to read this one.
From the Book: 5 Ways to Save on Your Taxes
Kamoroff’s book features tax deductions available for small businesses, home businesses, self-employed individuals, and independent contractors. If you receive a 1099-MISC form, the IRS’s “miscellaneous income” form, this book is for you. Here are some ways he says you can save on next year’s taxes when it comes to business expenses.
1. Keep good records. Get a receipt for everything. Have a good filing system for these receipts and keep them for at least three years. Receipts are your best defense if the IRS ever audits you. No receipt? No worries. Make notes about your expenses, such as driving mileage, or keep a business diary on paper or electronically that logs these expenses. Good records kept throughout the year will be handy when you get ready to file. For example, a cell phone used 100 percent for business can be deducted fully but you need to keep detailed records on the cell phone usage, including time, place, and purpose of call. Here’s a shortcut: Cell phone companies can provide you with a detailed call-by-call list.
2. Educate yourself. You can’t deduct if you don’t know what to deduct. For example, did you know your NAR membership dues can be deducted? Dues and other expenses for business groups, professional organizations, and trade associations are deductible. Other business deductions: rental costs for billboards, car expenses due to business purposes, computers, decorating expenses, ATM fees, late charges (except for government penalties), your Web site maintenance and domain name fees, downloaded software, fees paid to rent mailing lists, coffee services, marketing expenses (except for entertainment, which is 50 percent deductible), office
equipment, business seminars, events you sponsor, commissions or fees paid for referrals, and even buying Kamoroff’s book.
3. Don’t forget the small expenses. Stamps, envelopes, and tolls can all eventually add up to a significant tax deduction. For example, your safe deposit box, magazines you subscribe to for your business, flowers for your office or customers, food and beverages for business-related events, electricity and other utilities, and mileage, which for a real estate professional can really add up!
4. Structure your transactions to your advantage. “You want to do your best to be sure every expense of your business becomes a tax deduction,” Kamoroff writes. You may be able to do that just by being strategic with your big office purchases. For example, you might want to postpone or accelerate purchases and other business expenses at the end of the year to increase or decrease your profit, which will affect how much you pay in taxes. If this year you’re bringing in a lower income, you might benefit from postponing expenses to next year. If you’re fortunate to be having a high-income year and could use more deductions, accelerating expenses may be a good strategy.
5. Turn back time. Maybe you’re kicking yourself for not taking advantage of past deductions that you were eligible for but you just didn’t know about at the time. Well, good news: You can go back and amend prior tax returns to claim a refund. Amended tax returns must be filed within three years of when you filed your original return, or within two years from the time you paid your tax. So, Kamoroff says, for 2007 tax returns filed and paid on time (April 15, 2008) -- or ahead of time -- you have until April 15, 2011 to amend the return. Get filing!
Sneak Peek
“Last year, America’s small businesses overpaid their income taxes by over two billion dollars, according to a C.P.A. study reported in Business 2000 Magazine. The overpayments were made because the businesses failed to take tax deductions they were legally entitled to take. Many of these businesses are still unaware of their errors. They overpaid their taxes and don’t even know it. The IRS is not going to help these businesses. The IRS will never tell you about a tax deduction you didn’t claim. That’s up to you. Whether you struggle with your own tax return, hire an accountant, or put your trust in a software program, the more you know about what’s deductible, the more you’ll save on your taxes. Your tax return lists only a handful of deductions, so it’s up to you to make sure you find and claim every one. It really is a treasure hunt.”
About the Author
Bernard B. Kamoroff is a Certified Public Accountant with more than 30 years of experience. He is the author of five business books, including The Small Business Operator: How to Start Your Own Business, Keep Your Books, Pay Your Taxes and Stay out of Trouble.
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