Are you filing with some risky business write-offs?
Risky business write-offs are bad business. If you own a small business, you need to get your taxes right. That includes only taking write-offs you’re entitled to. If there’s one thing that can trigger an audit quicker than you can say “tax time” it’s including write-offs you shouldn’t. How can you tell? Take a look at the top three you need to avoid:
#1: Food, Booze, and Entertainment
Promoting your company, your products, your services, and what you have to offer through wining and dining is nothing new. It’s part of the wooing process salespeople and business owners go through to get the clients and seal the deals.
The trick when it comes to writing these things off lies in the purpose of the mealtime meeting, and who was in attendance. The guests can’t be a bunch of your college friends, a group from your book club, or your bestie who’s in town for the week. The meeting must focus on business and the goal must be to enhance or promote your company, to boost your sales, or to make a sale.
How does the IRS know? They can’t always be sure your write-off is on the up and up, but evidence is critical when you do write-off a business meal or outing. Records and receipts are vital, and a record of who was in attendance, topics discussed, and the outcome will only help you should the auditors come calling. History and habits will also help them figure out a scheme should there be one.
#2: Business or Pleasure?
It’s tempting to write-off your travel expenses as business expenses, even when it’s mostly not business. Don’t think you can have a conversation about your company and what you do while on a trip to Disney with the family and then use it on your taxes as a business expense. Don’t mix business and pleasure when it comes to travel write-offs. Take careful consideration of what the IRS considers business travel and what they don’t.
#3: That Home Office Might Not Be a Business Expense
There are stringent rules about how much of your home you can write off as a business expense, even if you work from home 100% of the time. The space you use for work must be exclusively for work. It can’t be for planning your family’s vacations, it can’t be for paying your bills, and it definitely can’t double as a den or theater room. Home office deductions can be a red flag for the IRS, so make sure you get it right when you file.
When you file your taxes, you want to take advantage of the maximum number of deductions possible. But taxes are complex, and write-offs can be tricky, especially when it comes to what you can write off, and especially if you own a small business.
Instead of getting yourself in a jam that can lead to an audit, talk to a professional and make sure you’re getting what you deserve, without stepping over the line. Contact the team at Incompass Tax, Estate, and Business solutions to help you avoid the dreaded risky business write-offs.