Can you smell it in the air? What’s that you say? No, it’s not chocolate chip cookies, even though Bruce from Cookie Advantage keeps bringing them by. It’s tax season! Or silly season, as it may appear from time-to-time. That time of year businesses frantically look for receipts, file extensions, and hunt for that elusive tax write off that will save them thousands.
The truth is there are several legitimate write-offs (deductions, as we call them) that are going to help off-set what you owe the government. However, there is no lottery version of a write-off that will make you rich either.
Where the concern comes in is from the small business owner that also fancies themselves as a tax DIYer or by having your tax guy or gal get cute with your books.
For example, one of my favorite Seinfeld clips was the one where Jerry's stereo (things we used to play music back in the day) is broken. Kramer tells Jerry that he can get him a refund by destroying it and sending it back to the manufacturer, so that it looks as if it was damaged by the Post Office. Jerry knows this is a more than shady plan, but Kramer explains that it just just a write off for the manufacturer. When Jerry asks Kramer what a write off is…..well, you should just watch thisclip. No, really, watch it!
Alright, let’s look at some do’s and don’ts of tax write offs:
Mileage
Where the concern comes in is from the small business owner that also fancies themselves as a tax DIYer or by having your tax guy or gal get cute with your books.
For example, one of my favorite Seinfeld clips was the one where Jerry's stereo (things we used to play music back in the day) is broken. Kramer tells Jerry that he can get him a refund by destroying it and sending it back to the manufacturer, so that it looks as if it was damaged by the Post Office. Jerry knows this is a more than shady plan, but Kramer explains that it just just a write off for the manufacturer. When Jerry asks Kramer what a write off is…..well, you should just watch thisclip. No, really, watch it!
Alright, let’s look at some do’s and don’ts of tax write offs:
Mileage
- DO - Keep an actual log of the miles you use your vehicle for business purposes. If necessary us a log book/app or use the sampling method. Neither are fun, but both are the correct way of doing it.
- DON’T - Make it up! You will invoke Murphy’s Law!
Home office
- DO – Bother to read the IRS guidelines for Home Office Deductions. There is even a simplified option for 2013. Simple by IRS standards, that is.
- DON’T – Try to write off your entire house and all of its expenses or just blindly make up a percentage of home use, without a rationale.
Meals
- DO – Track your meals when you are discussing business with a client. Write their name on the back of the receipt and know that you can deduct 50% of the meal.
- DON’T – Take your kids to McDonalds every night (a bad practice in general) and your significant other to Outback every weekend and think that you can deduct all of it with the IRS, because you handed a business card to the cashier or server.
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