Tax Services in Phoenix: Understanding Business Tax Deductions. Want to save taxes and stop IRS?

Want to save taxes and reduce the pain of IRS attack?

By Jeffrey Brooks, CPA, CFP, MBA for JBrooks Wealth Advisors, PC, a Professional CPA and CFP Firm  jeff@jbrookswa.com  602-292-2009  Please consult with your professional tax CPA regarding your specific circumstances!

 

What can my business deduct?  Do you want a simple way of looking what can be deducted and what can not be deducted?

More clients own second homes.  One of my clients who I have been helping understand sent me over a summary of what can be deducted along with a ledger than

 

 

Are moving expenses to our second/vacation home deductible if we work from there?  No, not at all, nothing. 
Driving to our second/vacation home, if we work there too…Are travel expenses deductible? 

 

Yes, but only if…1.  Must have 4 or more hours of business meetings on the day of arrival or the day after, no fudging that2.   Must have this scheduled before leaving

3.   Must have a list of such visits

4.   Must be in-person visits, not phone calls

5.   Stay as long as you want after the 4 hour meeting

 

Driving back from our second/vacation home, if we’ve worked there…Are Travel expenses deductible? Yes, but only if…1.   The day before you leave must be a business day on which you did business, in person (as above)2.    The day you arrive home, or the day after, must do 4 hours of in person business

3.    Must have these visits scheduled before leaving

4.    Must have a list of them

 

The idea is you went there to do business.  You did business while there at the front end and at the back end of it.  You came back to do business.

 

Home Office Reimbursements.  Can take deductions for a vacation home and my primary residence, if I take only one house at a time? Yes, only one house at a time.  And:1.   It must be while you are living there, the exact days, not just that month as a blanket period.2.   Must have PAID the expenses WHILE there

3.   EG, you arrive June 3 and Leave August 15, you can only take expenses you paid from June 3 – August 15.

4.   If it gets too messy, you can just skip taking both of them, and take only your primary residence all year.

 

Home Office Reimbursements —Repairs and Maintenance defined. 1.   Will last a year or less.  It is not going to be long-term.2.   Or it is such a small amount that it’s not worth putting as an improvement.3.   Not big amount repairs.

4.   EG:

      a.   Toilet repair.  Toilet could go out again in a month

      b.    vs. brand new toilet, which is an improvement, long-term.

5.   If you can justify something as a repair you’re better off.

6.   Must be living there when you pay for it

 

 

 

Direct Office Expenses – Direct Home Office Repairs on the excel spread sheet Example of OK:     You had your office painted.Example of not OK:

      You had your entire office completely remodeled with all new windows, doors, the ceiling raised, etc.  This would have to be amortized, and you get very little for that. 

 

 

Mortgage Principal – deductible? No. But see below… 
Mortgage Principal – amortized deduction  1.   You get to write it off on your HOR Excel spreadsheet for depreciation per month. 
Mortgage Interest – deductible? Yes1.   If you’re not going to rent the houses out, then all interest will be deducted either on:       a.   HOR sheet

       b.   or Schedule A as home mortgage interest

 

Telephone bills deductible? Yes but1.   ONLY BUSINESS phones are deductible, whether home or cell.        a.   They are deductible as direct company expenses

2.   The home line is NOT deductible, not even as home office reimbursement on the Excel spreadsheet

3.   If you have a secondary residence from which you work, and you forward the primary business phone to it when living there, you can take the primary residence business phone even during that period, because it is the primary phone that everyone knows you as, and it forwards to the vacation phone line.

 

Internet deductible? Yes but only where you are when you pay it.  Cannot take two internets at a time.
Home Office Reimbursements (excel spreadsheet)What can I be reimbursed for? 1.   Depreciation Expense on entire house.  See Jeff Brooks, CPA for this formula.  This is the percentage of the house that your exclusively-used office space takes up.  Cannot use that space for anything else, — absolutely nothing else.  2.   Take the % of monthly items which affect the entire house.  Homeowners Association Fees

Mortgage

Homeowners insurance

Real estate taxes

Security system monitoring fees

Surveillance cameras and monitoring fees

3.   Repairs, maintenance, furnishings:

Landscaping (but not lawn mowing)

Housecleaning

Pest control

HVAC

Furnace filters

Repairs on systems affecting the whole house (HVAC, plumbing, electrical)

4.   Utilities.  Gas, electricity, water & sewer.

5.   Direct Expenses, taken at 100%.  This means things exclusively for your office space.  A new desk or chair, painting the room. 

Home Office Reimbursements (excel spreadsheet)What can I NOT be reimbursed for? 1.   The house phone bill.  While you may take utilities at the %, you may not take any non-company phone bill or cellphone bill.2.   What is considered home improvements (as opposed to home repairs and maintenance).  Home improvements are big and/or long-term.An example of this is, you remodel your kitchen.  May not take that.

You buy a new toilet.  That is long-term.  May not take that.  It will last a long time.  You have your existing toilet repaired.  You may take that.  It could need repair again in a few months.

Anything that will last more than a year is not allowed.

       

 

What about the company car? The company car must have at least 50.1% company use (mileage) to qualify as being the company car. If your spouse drives you to the airport, goes back home, and comes back and picks you up again when you return, you may include both trips as company mileage.

 

Try to keep the personal miles off the company vehicle, because the more miles on it, the more business miles you will have to put on it, in order to reach the 50.1% business use.

 

 

 

 

 

 

FINANCIAL REPORT – 2014 EXPENSES – CATEGORY EXPLANATIONS                                               Updated 12/4/14

 

 

 

PayrollExpense Non-Tax(HSA)  HORHome OfficeReimbursmt Travel Travel – Meals &Entertainmnt

(at 50%)

 

ContractLabor ProfessionalFees andServices Credit Cardand BankFees Penalty Fees AutoExpenses AutoLoan  OfficeFurniture &Fixtures OfficeExpense Computer Hardware Purchases ComputerSoftware Purchases Marketing PrepaidsNext Year
Payroll wagesEmployer:-Medicare

-Unemplymt

(Fed,State)

401K

Payroll svc

(IntuitOnline)

IRS fees &

penalties

Co contribs to

retirmt plan

 

 

HSA-deposited-spent

 

Express here as one lump figure from the excel spreadsheet.See the Q&A for more specifics on this.

 

 

AirRental carHotel

Gas

Parking

 

Food and drink-yours-customers’ -Independent contractorNo payrollJust pay OutsourcedBookkeepingTraining

Tax advice

Tax prep

Legal

TSA precheck

Passport fees

Visas

Ck acct feesBank monthlyfees

Phys checks

Stamps

Wire txfer

Credit card

annual fees

 

??????????
IRS penalties???
Loan interestInsuranceIns deductible

Toll tag

Registration

Inspections

Maintenance

Parts

Tires

Fuel

Repairs

Gas

i

Loan principali All furnitureAccessoriesLamps, art

Curtains etc.

Electrician

Comp jacks

Etc.

Telephone jax

Telephones

Modems

Cell towers

Etc.

Labor f/same

 

Office SuppliesBus cardsStationery

Postage

FedX

Telephone bills

 

ComputersScannersPrinters

Accessories

iPhones

Earplugs

Accessories

AntivirusWeb feesDomain fees

QuickBooks

MS Office

Support fees

Online fees

Kaspersky

Bigfatcow

Gifts to custCoin setsGift certs

Advertising

Christmas

Cards

Gifts

Party

Gourmet food to customers

Annual mtg

Company car must have 50.1% company use (mileage) to qualify as such.If you drive hubby to airport, then go pick him up again, you get to include both trips as company mileage.

 

Try to keep the personal miles off the company car because that will require a higher percentage of business miles to make the 50.1%

 

 

 

 

No deduction if annual mtg could have been held at your place of business. 

 

 

 

Question:  What if I can’t find a column for my expense? 

 

Answer:     It’s probably office expense, or you can make a column for miscellaneous

 

 

 

 

 

 

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About Jeffrey Brooks

Jeffrey Brooks, CPA, CFP, MBA since 1976 has specialized in helping clients save significant taxes, help businesses increase their cash flow, revenues and profits while increasing their control and satisfaction. Jeff and his accounting firm sincerely cares about the happiness of his clients.

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JBrooks Wealth Advisors, PC.

Certified Public Accountant
Address: 4647 N 32nd Street, Suite B245
Phoenix, Arizona 85018
Phone: 602-292-2009
Email: jeff@jbrookswa.com