Posts Tagged ‘deductions’
Record Keeping – It is Important
Proof of a deduction or business expense takes two legs. Under IRS §162, Trade or business expenses, a taxpayer must prove that the expense:
- was ordinary and necessary for carrying on a trade or business; and
- was actually paid.
It is not enough to have bank statements showing checks written to office supply stores and the U.S. Post Office, but not a detailed record of items purchased and how they relate to your business. Conversely, you must have invoices showing the amount due and how these items related to the business and also proof that the invoices actually were paid.
If your record keeping is scant, you risk being denied the deduction because you cannot prove both key elements for each deduction.
Some expenses, such as travel, meals, entertainment and auto expenses, require more proof under §274, Disallowance of certain entertainment, etc., expenses. The IRS and courts have no flexibility on these items and deny deductions unless all the substantiation required by the regulations is provided. [Fleming v. Commissioner, T.C. Memo. 2010-60]
If you have questions regarding deductions and record keeping, consult your accounting professional and CPA.
Employee or Independent Contractor?
More and more individuals are working as freelancers and independent contractors these days—and the IRS is not particularly happy with that.
The problem is that it is sometimes difficult to determine whether an individual is an employee or an independent contractor—and this can lead to disputes with the IRS. Regardless of what label you put on a relationship, the key issue as far as taxes are concerned is control—the more control a company has over the work, the greater the chance the worker should be classified as an employee instead of an independent contractor.
Ten Most Common Bookkeeping Mistakes by Small Businesses
Stay on top your bookkeeping and you'll stay on top your business.
Whether you’re a one-person operation or a Fortune 500 company, bookkeeping is a significant part of your business.
It may not one of the more glamorous jobs, but bookkeeping is part and parcel of a company’s success. Mistakes and inefficiencies can cost a company both time and money.
Outlined below are 10 of the most common mistakes made by small businesses.
Qualifying for the New Sales Tax Deduction for Automobiles
A new deduction for qualifying motor vehicles taxes.
The recently enacted American Recovery and Reinvestment Tax Act of 2009 (P.L. 111-5) provides a new deduction for qualifying motor vehicles taxes.
1. Who can claim the deduction for motor vehicle taxes?
The Recovery Act makes the deduction available to purchasers of “qualified motor vehicles” after February 18, 2009, and before January 1, 2010 [IRC Sec. 164(a)(6) and Sec. 164(b)(6)(G)]. A qualified motor vehicle is a new passenger vehicle, light truck, or motorcycle that has a gross vehicle weight rating of 8,500 pounds or less, or a motor home of any gross vehicle weight [IRC Sec. 164(b)(6)(D)(i)].
