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<<< This will save you a lot of money >>>
Source: Y.A.
If you're a professional, no one needs to tell you that taxes are one of your largest expenses. The IRS doesn't make a point of advertising ways to lower your taxes and it certainly won't complain if you don't take all the deductions you're entitled to. In fact, many professionals miss out on all kinds of deductions every year simply because they aren't aware of them -- or because they neglect to keep the records necessary to back them up. Here are the top ten tax deductions that every professional business owner should know about. 1. Business operating expenses. This includes all your ordinary and necessary business expenses -- the bread-and-butter costs virtually every professional incurs for things like rent, supplies, and salaries. If you don't maintain an inventory or buy expensive equipment, these day-to-day costs will probably be your largest category of business expenses -- and your largest source of deductions. 2. Business entertainment. Oftentimes important business meetings, client contacts, and marketing efforts take place at restaurants, golf courses, or sporting events. The tax law recognizes this and allows professionals to deduct half of the cost of their business-related entertainment. However, taxpayers have abused this deduction in the past, so the IRS imposes strict rules limiting the types and amount of entertainment costs you can deduct. 4. Long distance travel. Professionals who travel overnight for business can deduct their airfare, hotel bills, and other expenses. And, if you plan your trip right, you can even mix business with pleasure and still get a deduction. However, IRS auditors closely scrutinize this deduction. To avoid unwanted attention, you need to keep proper records and understand the limitations on this deduction. 5. Long-term assets. A long-term asset is business property that you reasonably expect to last for more than one year. For professionals, this typically includes items such as office furniture, computer equipment, medical, dental, or other specialized equipment, buildings, automobiles, and books. There are two basic ways you can deduct long-term assets: by depreciating them (deducting some of the cost each year over the asset's useful life) or by using Section 179 of the Internal Revenue Code to deduct all of the cost in one year. 6. 7. Outside office. The great majority of professionals have outside offices where they do their work. An outside office -- that you rent or own -- presents many opportunities for tax deductions. Virtually all your outside office expenses are deductible, including rent, utilities, insurance, repairs, improvements, and maintenance. 8. Health insurance. As business owners, professionals have an advantage that most others don't have with regard to health care costs -- they can deduct many of their health insurance costs from their taxes. In addition, professionals can deduct a wide variety of uninsured medical expenses, including nonprescription medications, acupuncture, and eyeglasses. 9. Retirement plans. When it comes to saving for retirement, professional small business owners are better off than employees of most companies. This is because the federal government allows small businesses to set up retirement accounts specifically designed for small business owners. These accounts provide enormous tax benefits that are intended to maximize the amount of money you can put away in tax-deferred accounts during your working years. 10. Hiring workers. You may deduct most or all of what you pay someone you hire as a business expense. Thus, for example, if you pay an employee $50,000 per year in salary and benefits, you'll ordinarily get a $50,000 tax deduction. If you hire an independent contractor to perform services for your practice, you can deduct the amount you pay as a business operating expense. === Source: Ernst and Young... 50 OF THE MOST EASILY OVERLOOKED DEDUCTIONS The following list will serve as a reminder of some deductions you can easily overlook when you prepare your return. It is not intended to be all-inclusive, nor applicable to everyone. The circumstances of your situation will determine whether you qualify. 1. Accounting fees for tax preparation services and IRS audits 2. Alcoholism and drug abuse treatment 3. Amortization of premium on taxable bonds 4. Appraisal fees for charitable donations or casualty losses 5. Appreciation on property donated to a charity 6. Casualty or theft losses 7. Cellular telephones 8. Cleaning and laundering services when traveling 9. Commissions and closing costs on sale of property 10. Contact lenses, eye glasses, and hearing devices 11. Contraceptives, if bought with a prescription 12. Costs associated with looking for a new job in your present occupation, including fees for resume preparation and employment of outplacement agencies 13. Depreciation of home computers 14. Dues to labor unions 15. Education expenses to the extent required by law or your employer or needed to maintain or improve your skills 16. Employee contributions to a state disability fund 17. Employee's moving expenses 18. Federal estate on income with respect to a descendent 19. Fees for a safe-deposit box to hold investments 20 Fees paid for childbirth preparation classes if instruction relates to obstetrical care 21. Foreign taxes paid 22. Foster child care expenditures 23. Gambling losses to the extent of gambling gains 24. Hospital services fees (laboratory work, therapy, nursing services, and surgery) 25. Impairment-related work expenses for a disabled individual 26. Improvements to your home 27. Investment advisory fees 28. IRA trustee's administrative fees billed separately 29. Lead paint removal 30. Legal abortion expenses 31. Legal fees incurred in connection with obtaining or collecting alimony 32. Margin account interest expense 33. Medical transportation, including standard mileage deduction and lodging expenses incurred for medical reasons while away from home 34. Mortgage prepayment penalties and late fees 35. Out-of-pocket expenses relating to charitable activities, including the standard mileage deduction 36. Part of health insurance premiums if self-employed 37. Penalty on early withdrawal of savings 38. Personal liability insurance for wrongful acts as an employee 39. Points on a home mortgage and certain refinancings 40. Protective clothing required at work 41. Real estate taxes associated with the purchase or sale of property 42. 50% of self-employment tax 43. Seller-paid points on the purchase of a home 44. Special equipment for the disabled 45. Special schools and separately stated feed for medical care included in tuition 46. State personal property taxes on cars and boats 47. Subscriptions to professional journals 48. Theft of embezzlement losses 49. Trade or business tools with life of 1 year or less 50. Worthless stock or securities |
Every year American taxpayers attempt to lower their federal tax liability by including any credits or deductions they can think of. Below is a list of the 25 most ridiculous tax write-offs of all time most of which were allowed by the Internal Revenue Service.
Some of these deductions may be silly, but filing a correct income tax return is very serious. If the IRS disputes a claim you may end up facing an audit and thousands of dollars in penalties and fees. We recommend you speak with a tax professional before including any of these or similar deductions on your own income tax return. 1. Beer Give Away C A local gas station owner decided to give away free beer to his customers and was able to write this off as a legitimate business expense. 2. Fallout Shelter D Fearing a nuclear apocalypse, a gentleman built a fallout shelter and decided to deduct the expenses as "preventative medicine." Unfortunately the IRS does not consider fallout shelters medicinal. 3. Swimming Pool C After being diagnosed with emphysema, an elderly man was able to claim the cost of building a swimming pool. His stance was that the pool allowed him to exercise and that his doctor instructed him to get more physical activity. 4. Mink Coat D A businesswoman attempted to write off the cost of a $5,000+ mink coat claiming she needed it when visiting clients. However, the IRS did not consider this ordinary or necessary for her job and denied the deduction. 5. Exotic Dancers C The owner of a nightclub hired exotic dancers for a promotional party and was allowed to deduct the cost paid to the dancers as a valid expense. 6. Dancing Lessons D Even though the IRS allowed someone to build a pool for medicinal exercise, they refused to let a woman deduct the costs of getting dancing lessons. She claimed it as a medical expense. However, she was not instructed by her doctor to exercise. 7. Private Airplane C A couple who owned a successful business was allowed to deduct all costs relating to any business use of a private jet. This included trips back and forth from their secluded condo. 8. Whiskey D A man attempted to write off whiskey that he had given away to clients as gifts. Unfortunately, he tried to claim it as client entertainment expenses and was not allowed to deduct the costs. 9. Babysitting D It was rumored that woman volunteering for a large charitable cause was able to deduct the costs she paid to a babysitter while she was volunteering. However, according to the IRS ?you cannot deduct payments for child care expenses as a charitable contribution, even if they are necessary so you can do volunteer work for a qualified organization? 10. Arsonist Expenses D A gentleman who owned a furniture store hired an arsonist to burn down his store in order to collect the insurance money. He tried to deduct the $10,000 arson fee, but was denied by the IRS. 11. Body Oil C Professional body builders are allowed to deduct the costs of anything "ordinary and necessary" for their profession, including body oil expenses. 12. Racehorse D A businessman purchased a racehorse and attempted to claim it as a client entertainment expense. However, the IRS did not allow this deduction even though the man took clients to see the horse race in competitions. 13. Television & Cable D A Spanish teacher unsuccessfully attempted to write of the cost of his television and cable claiming that he only purchased it for the Spanish channels. 14. Ostrich Depreciation C The IRS allows you to depreciate the costs of any livestock as long as it is used for breeding. This was great news for a local ostrich farmer who was able to include the depreciation of his ostriches on his tax return. 15. Breast Implants C An infamous stripper by the name of "Chesty Love" was allowed to deduct the cost of her breast implants claiming they were an essential props in her performance. 16. Sperm Donation D After making a donation at a sperm bank, a Manhattan resident attempted to claim a depletion loss on the donated sperm. This did not fly with the IRS and his deduction was not allowed. 17. Prostitution D The federal government does not allow expense deductions for illegal professions. This was unfortunate for a Las Vegas prostitute who unsuccessfully attempted to deduct the cost of birth control. 18. Home Landscaping C A business owner who frequently met with clients at his principal place of residence was allowed to deduct a portion of the fees he paid to have his yard professionally landscaped. 19. African Safari C A dairy farmer was allowed to deduct the cost of trip to Africa as a business expense because his trip focused on learning about wild animals. The IRS considered this tip ordinary and necessary. 20. Cat Food C The IRS allowed a group of junkyard owners to deduct the cost of cat food. They claimed the food attracted cats that took care of rats and snakes. 21. Pet Moving Costs C The IRS considers family pets personal effects. Therefore, if you move for a job you can deduct the cost of moving your pets with you. This was the case for a family who incurred high costs to move their Great Dane. 22. Trip to Bermuda C The IRS always allows you to deduct expenses for business conventions or conferences. Even if they are in Bermuda, Barbados, Tahiti, etc. 23. Marijuana Soil D A California man attempted to deduct the cost of soil and gardening tools for his career as a marijuana grower. However, the IRS does not allow expenses for illegal professions. 24. Dog Deductions D People often try to find ways to get deductions for their dogs. Some times people claim them as dependents and one man even tried to count his dog as a security cost. Unfortunately, the IRS has consistently rejected these claims. 25. Designer Clothing D A male model hoped he could write-off the costs of his entire collection of designer clothing claiming that he needed to always "look good." Unfortunately, the IRS only allows for clothing related deductions if they are strictly for a business purpose. So shirts with a company?s logos would be allowed, but designer suits would not be. |
Best post all week!
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nice reading
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thanks for post
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did you boys read this first or just posting...? :)
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I'll wave some of that under my accountants nose and see what he says for the UK.
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You can also read the Income Tax literature for useful information. For Canada, read the Canadian Income Tax Act.
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I don't make any money. :1orglaugh
Seriously great post. Business people need to go through what's allowed and what's not before they give their accounts to the accountant. Most are bloody nothing more than book keepers. IMO |
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Source: BusinessGov
For the most part, online businesses are required to comply with the same rules and regulations of traditional small businesses. When it comes to taxes, however, several additional issues come into play. Check out this quick guide to find out what all business owners in the e-commerce world should know. Internet Tax Freedom Act The Internet Tax Freedom Act aims to protect the Internet's commercial, educational, and informational potential. For online businesses, this legislation spells out what is and is not allowed - clearing up all rumors about how e-commerce is taxed. It's important for these businesses owners to know their rights and responsibilities when tax time comes around each year. What's Allowed: The Act does NOT exempt e-commerce sales from being subject to business income tax. These sales are held to the same income tax standards of sales made from traditional brick-and-mortar or mail-order sales. Online businesses are liable for income tax, self-employment tax, employment tax, and excise tax. What's Not Allowed: The Act prohibits implementing Internet-only taxes. Basically, no taxes can be required of online businesses that are not required of other businesses. Taxes that would be in violation of this legislation include an Internet access tax, multiple e-commerce tax, bit tax, bandwidth tax, and email tax. If you do not have a physical presence in a state, which many online business do not, you are not required to collect sales taxes from customers in that state. Each state defines "physical presence" differently - to determine whether or not your business qualifies as a physical presence, contact your state's revenue agency. Employees vs. Independent Contractors Similar to traditional small business owners, when an online business requires additional operating help, owners are required to classify workers. For tax purposes, workers can be classified as either an employee or an independent contractor - and both have their benefits and drawbacks. To avoid federal penalties, it's important for business owners to understand how to accurately classify their workers. To make a classification, assess what work is required of that person and how that work will be completed. Employee: You, as the owner, control the answers to both these issues. As their employer you tell them what needs to be done and how it needs to be done. Independent Contractor: You, as the owner, control what needs to be done but not how. These workers are required to complete as certain project but how and when (within a set time frame) it is completed is up to their discretion. For more information on classifying you workers, check out the IRS Guide to Independent Contracts (Self-Employed) or Employee?. If you need further assistance classifying a worker, IRS Form SS-8 can be filed for an official review and determination of a worker's status. Reporting Paid Wages Tax laws require that online businesses report how much all workers were paid throughout the year. Business owners must report these depending on their classification: Employees: Business owners are required to pay Social Security, Medicare, and unemployment for all persons classified as employees. Regardless of the length of employment, a W-2 Form must be filed for each employee. If your business has employees, check out Forms and Associated Taxes for Employees. Independent Contractors: Business owners are NOT required to pay Social Security, Medicare, or unemployment for persons classified as independent contractors. Owners generally file IRS Form-1099 for independent contractors. If your online business works with independent contractors, check out Forms and Associated Taxes for Independent Contractors. Home-Based Online Businesses Although not all home-based businesses utilize e-commerce, most online businesses are home-based. If you run a business out of your home you may qualify for tax deductions. Be sure to understand what requirements must be met before making any deductions. What's Required: To be eligible for any home-based deductions, the area in your home where you operate your online business must me used "exclusively" and "regularly" for business. In addition to this requirement, your home must be your business's principal place of business, a regular meeting place to deal with customers, or a separate structure used in connection with your business. Read more about home-based deduction eligibility. What Deductions Apply: If you meet each of the requirements for a home-based business, your online business can make certain tax deductions. The first step in determining your deductions is to compute the percentage of your home that is used for your business. This percentage can then be used to proportionately deduct property taxes, utility expenses, insurances costs, mortgage or rent, maintenance fees, and other home costs. For more information, read "How to Claim the Tax Deduction for Business Use of Your Home." |
one step ahead of you....
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Source: SmartMoney
1 Going Green With much fanfare, the government created several green tax initiatives last year. Consumers who installed new doors, windows or air-conditioning in 2009 can get tax credits of up to $1,500; those with new geothermal heating or solar energy systems can write off up to 30 percent of the costs. There?s also a credit of up to $3,400 for some hybrid cars or fuel-efficient motorcycles. But credits for the most popular hybrid, the Toyota Prius, have been phased out. 2 College Credit Thanks to the dismal economy, enrollment is up by more than 15 percent at higher education institutions. There?s a slew of credits for students, including a Lifetime Learning Credit of up to $2,000 for coursework to improve job skills. Joint filers can?t claim the credit if income exceeds $120,000. 3 Healthy Savings Nearly 23 percent of Americans with private health insurance have a high-deductible plan that allows contributions to a health-savings account with pretax dollars. This works best for people who are generally healthy and rack up few bills. Those under 65 can fund up to $7,950 for 2009. 4 Taking Care Long-term-care insurance, which can be used to cover a nursing home or in-house caregiver, can be pricey. But the premiums are considered a medical expense, and such expenses are deductible if together they exceed 7.5 percent of an individual?s taxable income. For individuals between the ages of 50 and 60, the maximum deduction for premiums in 2009 is $1,190. 5 Fund Your Retirement One way to trim your tax bill is to fully fund your individual retirement account. IRA deductions are available for contributions until Apr. 15, although individuals covered by an employer?s 401(k) can?t claim an IRA deduction if their taxable income exceeds $65,000 ($109,000 for joint filers). The maximum annual contribution is $5,000, or $6,000 for those 50 and older. Tax breaks for the self-employed are more lucrative: A SEP-IRA has no income limits, and the contribution limit is $49,000 for 2009. |
great post i love how drug and alcohal treatment is number 2 on the list LOL
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Medical expenses have to be really large before they count for anything.
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Don't overlook the medical expenses of everyone listed on your tax return. Medical and dental bills for you, your spouse and your dependents count toward reaching the allowable deduction limit. You might be able to count some medical expenses you paid for a parent, even if Mom or Dad isn't considered your dependent for exemption purposes. And while it's not something we want to think about, don't forget about medical bills you paid for a deceased dependent in the year they were paid, whether before or after the person passed away. Overlooked medical costs Once you're confident you know just whose costs are covered, make sure you don't miss one. Allowable, often overlooked, medical deductions: Travel expenses to and from medical treatments. The IRS evaluates the standard cents-per-mile allowance each year. For 2009, you can deduct eligible medical travel at 24 cents per mile. In 2010, the mileage rate deduction is 16.5 cents. Insurance payments from already taxed income. This includes the cost of long-term care insurance, up to certain limits based on your age. Uninsured medical treatments, such as an extra pair of eyeglasses or set of contact lenses, false teeth, hearing aids and artificial limbs. Costs of alcohol- or drug-abuse treatments can be counted on your Schedule A. Laser vision corrective surgery is a tax-allowable procedure. Medically necessary costs prescribed by a physician. That means if your doctor told you to add a humidifier to your home's heating and air conditioning system to relieve your chronic breathing problems, the device (and additional electricity costs to operate it) could be at least partially deductible. Some medical conference costs. You can count admission and transportation expenses to the conference if it concerns a chronic illness suffered by you, your spouse or a dependent. Meals and lodging costs while at the seminar, however, are not deductible. Health-conscious taxpayers also have a friend in the IRS. Weight-loss programs, in some instances, now might count as a deductible medical expense, joining the stop-smoking programs the agency approved earlier. But don't try to cheat on your calorie intake or the IRS. The diet program must be medically necessary. Acceptable situations include, for example, when a doctor recommends the regimen to reduce the health risks of obesity or hypertension. And don't be confused by the differences in your flexible spending account, or FSA, rules and IRS deductions on Schedule A. You can use FSA money to reimburse you for over-the-counter drug purchases. But when it comes to itemizing deductions at tax filing time, medications you picked up off supermarket shelves don't count. So you can throw away all those aspirin receipts you've been hoarding. Special medical needs If you have special needs, however, there are some costs you can write off. Take into account the cost of a wheelchair, crutches and equipment that enables a deaf person to use the telephone or that provides television closed-captioning. Don't forget a Seeing Eye dog or canine for the hearing-impaired, or the costs to retrofit your car with special hand controls or space to hold a wheelchair. Some home remodeling also might be just the prescription for a tax break, as long as you follow your doctor's orders and IRS rules. If you need, for example, to add a chair lift to get up and down the stairs because of a medical condition, this is considered a legitimate expense. Changes to your home to make it more accessible for a handicapped resident also are allowable. Changes include: - Installing ramps. - Widening doors and hallways and lowering counters and cabinets. - Adjusting electrical outlets and fixtures. - Grading exterior landscape to ease access to the house. Elevators, however, generally aren't deductible. The IRS considers this a structural change that could increase the value of your house and, therefore, doesn't allow it as a medical deduction. In calculating residential remodeling as a medical deduction, keep in mind that you likely won't be able to write off the full costs on your tax return. If the improvement increases the value of your property, that amount is subtracted from the project's cost and the difference counts as a medical expense. The value added to your home isn't lost taxwise. It will increase its basis so that when you do sell, it will help you in reducing any possible taxes owed on that profit. Household help to care for you or an ailing dependent isn't deductible either, even if it's recommended by your doctor. Such assistance, however, might help you qualify for the dependent care credit. Medical, but not tax deductible Uncle Sam does set some additional medical deduction limits. As a general rule, he doesn't care how we look. Cosmetic surgery, health-club dues or costs of a weight loss program that is not medically necessary aren't deductible. Neither are hair transplant operations or, at the other extreme, electrolysis treatments. And don't try to write off that expensive bottled water you have delivered each week. Sure H2O is critical to good health, but the tax collector thinks your tap water will suffice. Source:BankRate |
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this is good info, thanks for sharing it :)
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