Robert J. Fedor, Esq., L.L.C.

Small business owners and tax deductions

With tax season in full swing, individuals who take on the task of completing their own taxes are often confused by ever-changing tax codes, regulations and rules. This is often especially true for small business owners for whom tax season is often accompanied by anxiety and stress related to whether financial records are accurate and deductions pass the IRS's sniff test.

In the next two blog posts, we'll take a look at deductions small business owners would be wise to take advantage of as well as how to ensure IRS rules are being followed while doing so. While most small business owners know they are allowed to take advantage of deductions related to a home office and business-related travel expenses, few may realize they can also take deductions for retirement contributions and for employing one's own child.

Business owners who have a home office may deduct costs associated with maintaining that designated space. However, home office deductions must be in accordance with IRS rules which dictate that the designated space is only used for business purposes. If an individual has a room or space in their home that meets this criteria, an individual may deduct a portion of their mortgage or rent as well as utilities.

In addition to deductions related to the actual square footage of a home office, small business owners can also take advantage of deductions related to the contents of that room or space. For example office supplies and equipment including everything from paper and pens to furniture, computers and printers may be deducted. It's important, however, to closely review IRS rules about taking these types of deductions as there are strict requirements related to each.

In our next post we'll continue to discuss tax deductions for small business owners. When taking any deduction, it's important to do so in accordance with IRS rules. In cases where the IRS determines business-related deductions are invalid, an individual may face fines and penalties and, depending on the amount, criminal charges related to tax crimes.   

Source: Fox Business, "A Dozen Deductions for Your Small Business," Dana Dratch, March 17, 2014

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