Overlooked Business Deductions? - Tom Willett
Surprised to hear about taxes this time of year? Don't be, because if you've been missing out on the following deductions, at least you can take advantage of them for a few final months of 1999.
1. Assets you owned prior to starting your business. Before you even thought about starting a business, you probably accumulated many business tools-- computer, software, printer, calculator, typewriter, telephone, desk, chairs, filing cabinet, bookshelves, etc. If these are now being used in your business, you can depreciate them over 3, 5, or 7 years depending upon the asset.
2. The daily newspaper is a source of business news. Your local newspaper has all kinds of information that will help you with your business. It has changes in the tax law, articles on legislation Congress, the state legislature, and local city council may pass which affect your business. There are also general articles which may relate to your particular products. Start writing a business check to pay for the newspaper rather than a personal check.
3. Subscriptions to certain magazines are also deductible. Subscriptions to Network Marketing magazines like this one are obviously deductible, but other magazines may be as well. For example, Success magazine features frequent articles about Network Marketing; Bottomline tax magazine has articles on taxes; or magazines pertinent to your products or prospects.
4. More than mileage is deductible for your auto expenses. Most people know they can deduct $0.31 per mile for business trips. What is often over- looked is the interest on the car loan. For example, if your mileage log for the year shows you used your car 54% for business, then 54% of the interest on the car loan is deductible. If you have to pay a toll (on the way to a conference), it is 100% deductible; parking for a business meeting is 100% deductible. Save your receipt from the parking garage, and if it is at a meter, write yourself a cash receipt.
5. Phone calls from conferences or meetings. Obviously long distance calls related to your business are deductible, but did you know that calls back to your family from a conference are, too? If you call home from a pay phone, again, write yourself a cash receipt.
6. Street clothing is not a business expense, but.... Some people try to deduct the cost of their street clothes claiming they only wear them at Network Marketing meetings, presentations, etc. The fact is they are not deductible. However, most Network Marketing companies sell logo clothing-- tee shirts sweat shirts, jackets, "golf" shirts, hats. caps, bags, the list goes on. These constitute advertising which is deductible.
7. Pay for an advertisement rather than making a contribution. Business owners are often approached to make charitable contributions, and even if you write a business check, it counts as a personal contribution-- not a business expense. It is better for you to make such a contribution as an ad so your company name appears and thus is a deductible advertising expense.
8. Medical expenses can be 100% deductible in your business. This is more advanced and will probably require the help of an accountant to set up, but the savings can far exceed the expenses. If you are married and your spouse works in the business with you, set him or her up as an employee, issue periodic (quarterly or semi-annual) payroll checks with all of the normal withholdings (FICA and federal, as well as state and local if they apply), and file all of the regular payroll reports. If done properly, you'll be able to deduct not only 100% of your medical insurance, but also 100% of the expenses that fall outside your medical plan (eye glasses, chiropractor, dental, etc.).
9. Retirement plans enhanced. If you claim an IRA, you are limited to $2,000 for you and $2,000 for your spouse. With a successful business and your spouse on payroll, however, you can establish a SEP-IRA and contribute up to 15% of his or her salary toward retirement and deduct it as a business expense. The custodian, such as a bank or mutual fund, will establish this type of account for you.
The tax law is complicated. While these items merely serve as guidelines, your accountant should be able to provide a detailed review of how these suggestions apply to your specific business.
TOM WILLET is the owner of TRW Consulting Services, providing accounting and tax services to small business owners for the past 12 years. He's been in Network Marketing since 1995, and is the author of Tracking My Business Profit, a manual bookkeeping system for Networkers. You can reach TRW Consulting by phone (614) 870-7378, email firstname.lastname@example.org, or on the web at www.trwconsulting.com
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Reprinted with permission from Upline, Legal - September 1999, 888-UPLINE-1, http://www.upline.com