Tag Archive for Business Expenses

Tax Court In Brief: Disallowance Of Taxpayer’s Deductions

Jason Freeman - Business Deductions

Spencer v Commissioner, T.C. Memo. 2022-8 | June 7, 2022 | Marshall, J.| Dkt. No. 17106-19S

Opinion

Short Summary: This case involves the disallowance of taxpayer’s deductions regarding (1) contract labor expenses, (2) car and truck expenses, and (3) repairs, and maintenance expenses for not meeting substantiation requirements. In tax years 2016 and 2017, Brandon Spencer (Spencer) operated Home Comfort Transportation LLC (Home Comfort), a business that offered non-emergency transportation services to medical patients. As part of its business, Home Comfort purchased and maintained vehicles and had full-time and part-time drivers who were paid by check and cash, respectively. Cash compensation payments were not documented. Additionally, Spencer retained receipts for vehicle rentals, purchases and tolls, invoices from repairs, an insurance statement, and vehicle registration records. On his tax returns for years 2016 and 2017, Spencer claimed Schedule C itemized deductions for Home Comfort’s expenses, including contract labor and vehicle-related expenses. The IRS selected Spencer’s returns for examination and IRS issued a notice of deficiency (IRS CP3219A Notice) to him. Spencer filed a petition with the Tax Court and, after concessions by the IRS, the issue remaining for trial regarded deductions for expenses for contract labor and vehicle-related expenses.

Key Issues:

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Written by | Posted in Business Deductions • Business Expenses

How To Avoid IRS Tax Problems With Business Expenses

How To Avoid IRS Tax Problems With Business Expenses

Do you spend money on your business throughout the year? If you’re a business owner, I’m sure you do. While some of those costs can be deducted from your tax return, not all business expenses qualify. Learn what types of costs you can deduct, as well as what it means to overstate your business expenses – and what penalties you might face from the IRS if you do.

Key Insights We Will Discuss

  • What counts as a business expense
  • Separating your expenses
  • Types of expenses you can deduct on your tax return
  • What is means to overstate your business expenses
  • Penalties for making false deductions on your returns

What Counts as a Business Expense? 

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Written by | Posted in Avoid IRS Tax Problems • Business Expenses

IRS Updates Guidance For Deductible Business, Charitable, Medical And Moving Expenses

IRS

The Internal Revenue Service issued guidance for taxpayers with certain deductible expenses to reflect changes resulting from the Tax Cuts and Jobs Act (TCJA).

Revenue Procedure 2019-46, posted today on IRS.gov, updates the rules for using the optional standard mileage rates in computing the deductible costs of operating an automobile for business, charitable, medical or moving expense purposes.

The guidance also provides rules to substantiate the amount of an employee’s ordinary and necessary travel expenses reimbursed by an employer using the optional standard mileage rates. Taxpayers are not required to use a method described in this revenue procedure and may instead substantiate actual allowable expenses provided they maintain adequate records.

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Written by | Posted in Business Deductions • Charitable Expenses • Moving Expense Deduction

Maximizing The Tax Benefits On Travel And Entertainment Expense

Kasim Qasim

Travel and entertainment are legitimate deductions, but few business owners take full advantage of them. One reason may be that they fear that the deduction will be challenged by the IRS and they’ll have to undergo the scrutiny of an audit. Another reason may be because the owner is unsure of how to take the deductions or what’s allowed and what’s not allowed. To be clear, travel and entertainment are allowable deductions. the IRS understands that much of business is conducted over drinks, meals or on the golf course. Travel is also an obvious necessary to conduct business. If you’ve been hesitant about taking travel and entertainment deductions, here is a guide to maximizing the benefits of these deductions.

What’s Really Allowed?

The first thing is to feel more confident about what’s really allowed with travel and entertainment expenses. That will enable you to recognize the expense when it occurs and to fully take advantage of every possible deduction.

Travel Expense Allowances

Travel expenses related to your business activities are allowed in the following two categories:

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Written by | Posted in Tax Expenses • TaxConnections • Travel And Entertainment

Business Or Hobby, What Is The Difference?

Maybe you cater for your friends, maybe you make jewelry, maybe you sell your artwork, maybe you have a lemonade stand- regardless of what you do, do you know how the IRS views this? Here are some tips on how to tell if your activity is a business or a hobby and the tax implications of each.

1. The IRS has a checklist for determining if your activity is a business or hobby. The list is basically intent. Is this for fun or do you intend to make a profit? Do you want to depend on the income? What is the intent of your activity?

For the IRS list that discusses the difference between a business and a hobby click here.

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Written by | Posted in Business Tax • Deductions

The Guide To Organizing Finances For Freelancers

MileIQ, Tax Advisors
Many freelancers have trouble organizing their finances. This article walks you through how to organize finances for freelancers.

How to Organize Finances for Freelancers

The best way to organize your finances as a freelancer is to become more aware of both your business expenses and your personal expenses. This means that every month you should have a month-end budget/financial statement for your business as well as one for your personal life. This will help you understand your cash flow and organize your finances.

In order to create these month-end statements, you’ll need to organize your finances using the following three steps:

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Written by | Posted in Self Employment Tax

When Hockey Meets the IRS

The United States Tax Court recently made a ruling that drew some fine lines about what constitutes a de minimis fringe benefit for employees. The IRS had sued the Boston Bruins Hockey Team, contending that meals served to players and others while attending away games was subject to the 50 percent limitation on the cost of meals provided to employees. It should be noted that this is a working-condition benefit and not taxable to the employees. The Bruins countered the IRS, stating that these meals met the qualifications of a de minimis benefit and were therefore fully deductible. The Tax Court sided with the Bruins, stating that the benefit was fully deductible. Read More

Written by | Posted in IRS

Perspective: What Frustrates Me Most About Start-Ups!

Manasa Nadig, Start-ups, tax help

One of the services my firm offers is assistance in Entity Selection for start-ups. This is usually when we talk about various options available for the incorporator and what type of entity would be the best fit for the start-up in terms of liability exposure, record-keeping, and tax filing. This meeting usually results in setting up an entity, giving the incorporators guide-lines for record-keeping and help with choosing accounting software and set up, and so on, you get the drift?

So off they go with an Entity tucked away neatly under their arm, and the title music plays—you think? But no! Wait, here’s where the music stops with an ugly, teeth-tingling screech… The incorporator comes back at tax time and you look at all the bank statements, and you see the big thou-shalt-not of, “Commingling the Books.”

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Written by | Posted in Small Business

Top Tax Write-Offs That Could Get You In Trouble With The IRS – Part 2 of 2

From travel expenses to paying wages to family members, there’s no limit to what people will try to write off at tax time for the sake of their business. But where do you draw the line? Which write-offs you’re trying to write off go too far?

Tax Write-Off: Personal Expenses

This is a category business owners can easily get into trouble with if they’re not careful.

• Key Issue: You simply can’t deduct services of a purely personal nature that aren’t related to your business.

• How to Do It Right: Getting an opinion from a tax professional as to whether an expense is deductible for your business makes most sense. The cost of high-speed internet Read More

Written by | Posted in IRS • Tax Deductions • Tax Tips

Top Tax Write-Offs That Could Get You In Trouble With The IRS – Part 1 of 2

From travel expenses to paying wages to family members, there’s no limit to what people will try to write off at tax time for the sake of their business. But where do you draw the line? Which write-offs you’re trying to write off go too far?

Tax Write-Off: Travel Expenses

Here’s a write-off that sometimes is difficult deciding just where to draw the line. Can you deduct the cost of going to see a Cirque du Soleil show in Las Vegas if you’re treating your client? The answer is yes, as long as you can justify it as a business expense. And what if your spouse goes along on the trip? As long as they’re a partner or employee of your business and attended conventions or meetings on the trip you took together, then his or her travel and 50% of his or her meals are also deductible. Read More

Written by | Posted in IRS • Tax Deductions • Tax Tips