Tax Write Off
There is no limit to what people may try to claim as a tax write off. In one well documented case a stripper wanted to earn more money and receive bigger tips from her clientele. So, she scheduled an operation for 56FF breast implants. A Tax Court judge (who was female) approved the deduction for the cost of the surgery. You too can get a tax deduction for unconventional business expenses. The key is that the business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.
It is important to separate business expenses from the following expenses:
- The expenses used to figure the cost of goods sold,
- Capital Expenses, and
- Personal Expenses.
Tax write off: Moving Expenses
Most people know that if you move to another town for a new job, the Internal Revenue Service (IRS) will let you deduct a portion of those expenses from your taxable income. But, what happens if you are self-employed? Is the benefit the same? Yes, the IRS says go ahead and take full advantage. After all, you are moving to increase your business prospects. Even though your entire business may be a party of one.
Tax Write-Off: Home Office Expenses
Even though home office expenses have been an audit red flag for years if you do have a home office you should deduct the expenses. Why take the risk? Because, no one can predict if or when you will be audited. Are you willing to lose out on possible cash in your pocket today? Think about it, if it turns out you were due a refund if you took the deduction once the three year statute of limitations passes the IRS gets to keep your money. Are you in the business of giving the IRS free money? Just make sure you follow the rules the IRS sets out for taking the deduction.
Tax Write-Off: Cell Phone Bill
Cell phone expenses can be a big deduction as long as you don’t make too many personal calls. The IRS will scrutinize this one because of how easily it can turn from business to personal use. You need to keep good records. Plus, copies of all pages of the telephone bill to prove the percentage of business versus personal use.
Tax Write-Off: Travel Expenses
You can deduct travel and 50 percent of related meals and entertainment. But, the travel should be reasonably related to your business. Documentary evidence ordinarily will be considered adequate if it shows the amount, date, place, and essential character of the expense. For example, a hotel receipt is enough to support expenses for business travel if it has all of the following information: the name and location of the hotel, the dates you stayed there, separate amounts for charges such as lodging, meals, and telephone calls. A restaurant receipt is enough to prove an expense for a business meal if it has all of the following information: the name and location of the restaurant, the number of people served, the date and amount of the expense.