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 Are You Claiming Everything You Can?

Author: Lani Coggins

Every business owner knows there are only two ways to improve your bottom line: generating revenue and reducing expenses. Taxes are a business expense – likely your single-highest cost each year – so you want to do everything possible to maximize your tax deductions.

Fortunately, there’s still plenty of time left to get better organized for the 2012 tax year.

Organization is the key. If you plan ahead, you’ll be well-prepared to capture all important tax deductions that apply to your home business. Here are some things to think about:

Save your receipts. A $100 business expense could equal as much as a $50 tax deduction. Need we say more? But if you’re audited, you’ll have to prove your claims, so receipts are critical. Knowing in advance what tax deductions you’re allowed helps you know which receipts to save. The best advice? Save all of them.

You can file your paper receipts, or use special software or even online applications to track expenses. As long as you’re organized, tax deductions won’t just fall through the cracks.

Of course you should always consult a professional for detailed tax planning advice, especially to understand the opportunities and limitations of each type of deduction. But here are some specific potential savings you may not be exploiting for your home business:

• Startup expenses, if it’s your first year in business and you’re not making money yet.
• Office supplies and equipment.
• Home office expenses, based on the percentage of space allotted to your office, including rent or mortgage payment, utilities, communications, insurance, property taxes, security, etc.
• Research and education expenses.
• Mileage and other auto and travel expenses.
• Health insurance premiums.
• Moving expenses, whether you move your home or move your office from home to an independent office space.

Are you claiming everything you can? Contact a tax professional now, rather than waiting till tax time when it’s too late. Our experts here at The Tax Office Inc. can help assess your situation and advise you on how to capture all tax deductions available to your home business.

Guidance for Individual Tax Issues

Author: Lani Coggins

Have you neglected to file income tax returns, or do you owe the IRS money in the form of back taxes? You must resolve the issue as quickly as possible. As you continue to put it off, the IRS will continue to add penalties and interest and -- at any time -- can commence collection proceedings.

IRS collection methods can include:

• Wage garnishments
• Levies of your bank accounts
• Liens on your property
• Legal proceedings, potentially including a jail sentence

As scary as this may sound, remember that all the IRS really wants is to get its money from you. It would rather not turn this into a situation that threatens the very existence of your company. If it cannot collect from you in full, the agency may be willing to get the amount owed over time, and may even accept less than you actually owe them.

The best way to deal with your IRS issue is to discuss your options with a team of tax professionals, and then let them contact the government on your behalf. Typically speaking, they will file any old returns as quickly as possible to stop the accrual of penalties for your failure to file. Once they have done that, they will work with the IRS to take care of your liability for back taxes. Typical solutions include:

• Paying everything you owe in a lump sum. This will minimize your interest and penalty expense.
• Paying your entire balance through an installment plan. This method lets you make monthly payments on your balance, although it typically means that you pay more, since interest and penalties continue to accrue. (An installment plan can be less expensive than using a credit card to pay your taxes, though.)
• Paying a reduced balance through an "offer in compromise." In certain circumstances, the IRS will agree to clear your debt with a partial payment.
• Eliminating dischargeable tax debts through bankruptcy.

At The Tax Office, we have a lot of experience dealing with the IRS; we can speak their language. We understand the options, and we can help you determine the best one for you. Contact us today, and we'll get this issue resolved -- finally.

How to Make the Most of Business Expenses

Author: Lani Coggins

Despite the old adage that advises against mixing business with pleasure, life is not always so black and white. Because business travel provides an opportunity to explore new places without incurring as many expenses, many people add some personal time to a business trip, especially in a down economy. While this is an excellent way to save some money, it does make deducting business expenses a little less straightforward.

Use these guidelines to help you decide whether you can deduct certain expenses next time you mix business and personal travel:

• The main purpose of the trip must be for business. If you go on a vacation and tack on a business meeting, this does not qualify as a business trip.
• All transportation expenses can be deducted. When the primary purpose of the trip is for business, you can deduct your flight, taxis to and from the airport, rental cars and train fares.
• Enjoy the weekend. The IRS has a rule that allows you to deduct business expenses for a Saturday night stay if it will result in lower air fare. You don't necessarily have to be working over the weekend to claim this benefit, so compare fares to see if this rule applies to your trip.
• Save those receipts. If you are traveling on behalf of a client, they may reimburse some or all of your expenses. If you have business expenses that are not reimbursed, you can deduct them on your Schedule C.

The rules for foreign travel are a little more complicated, but you can deduct all transportation costs if the trip lasts less than one week, or if more than 75% of your time is spent on business. The rules for foreign conventions are less liberal; in order to claim all transportation deductions, there must be a legitimate reason for the conference to be held in a foreign location. 

If you have more questions about deducting business expenses, tax planning, tax preparation, bookkeeping, or any other tax-related issue, contact us here. 

Six Things You Should Know About It

Author: Lani Coggins

If you can legitimately take the IRS' home office deduction on your taxes, you're a winner twice over. You've been able to take an unused portion of your home and turn it into productive space for a business that you've launched yourself.  You win again because this element of the 1040 can reduce your tax obligation.

But the IRS scrutinizes this deduction carefully to make sure that you're not just trying to get a write-off for a hobby.

To make sure that you qualify to get the full benefit with minimal risk, here are six things you should know:

• You must use the space in connection with a trade or business, not just for a profit-seeking activity.
• Your home office must be used exclusively for your business. A room with a desk and a computer that you also let your children use for homework or that you use to surf the Internet is not a home office.
• You can deduct space used for storage or inventory if it meets certain eligibility requirements.
• Your home office must be a principal place of business. If you work for a company that provides you with an office at its location, you will not be able to take a home office deduction for that business unless you are doing so for the convenience of your employer and are not "renting" that office space to him or her.
• You can claim an unattached structure on your property if your use is consistent with the IRS' other requirements.
• Home offices can support a number of deductions. For example, if the office represents 15 percent of your home, you can write off 15 percent of all of your home's costs, including utilities. You can also depreciate the office portion of your home.

At The Tax Office, we have many years of experience in this area, and will be happy to handle all of your tax preparation needs. If you can legitimately claim the home office deduction, you'll want to document absolutely everything that's legally allowable on the IRS Form 8829. If you have any questions about your home business, contact us here.