Risky business write-offs may save you money right now but cost you more than you bargained for in the future.
It’s best to stay off the IRS’s radar, but these risky business write-offs may land you on the audit bullseye. As a business owner, you can deduct a variety of expenses that typical employees cannot. While you should take every legitimate deduction, some “business expenses” are not always eligible. Take heed before you claim any of these dangerous deductions.
Think Twice About Car Mileage
For many companies, car mileage is one of their biggest deductions. They rely on this write-off to lower their overall tax burden, but before you take the auto deduction, you need to have the right paperwork.
Guesstimating how many miles you drove for business is a big no-no in Uncle Sam’s eyes. If you want to deduct mileage, you need to have documentation to support your claim. Furthermore, not every trip is deductible. For example, you can’t deduct the miles for your regular commute—only additional trips to secondary locations. A tax expert can help you sort through which miles will save you money and which will leave you stranded on a highway to an audit.
Business Trips Are for Business Only
A good number of small businesses deduct travel expenses. However, this deduction is only allowed if you actually conducted business on the trip. Taking a family cruise and having a two-hour video chat with a client doesn’t count. Make sure you separate business from pleasure when writing off travel costs.
Now, if you go on a legitimate business trip, then, by all means, deduct it! Be sure to keep a detailed log of every expense you incur in case the IRS wants proof. If you can back up your write-off with an ironclad paper trail, you have no reason to worry.
Be Smart with Shared Assets
As a small business owner, you probably use several assets in both your professional and personal life. For example, you use a cell phone to connect with clients, but you may also accept calls from your toddler. Perhaps you rely on the internet to conduct business, but on your days off, you use it to browse eBay and catch up on YouTube videos.
Shared assets are tricky to claim come tax season. Since you don’t use these assets only for work, you can’t write off the full value. Instead, you can only deduct the percentage of the asset that you actually used for business. Once again, keeping detailed records will help save you in the event of a dreaded audit.
Don’t Leave Your Deductions to Chance with Risky Business Write-Offs
The IRS isn’t very forgiving when it comes to deduction mistakes or miscalculations. Taking the wrong deductions could land you in boiling hot water—and you may end up paying back a lot more than the amount you saved initially. Uncle Sam leaves no room for error.
Incompass Tax, Estate & Business Solutions wants to help take the guesswork out of deductions. With over 29 years of experience, we know how to save you the most money on your taxes without getting you in trouble with the IRS. Our team will go over your return with a fine-tooth comb to make sure you filed everything correctly. Contact us to begin your taxes and avoid any risky business write-offs.