Are You Ready for Tax Season?

Well, we will be embarking upon another tax season.  I already know what you're thinking so there's no need to re-iterate the "bah hum bug"s!!!  As business owners it is imperative that we not only keep accurate records of our expenses, but it's also important that we understand what our business expense deductions are.  Uncle Sam doesn't care whether or not you fully understand these issues.  All Uncle Sam is interested in doing is making sure you pay your fair share of taxes.

Are you fully aware of what you can deduct as a legitimate business expense? Let's go over a few items.

Most business owners use their personal vehicle for business as well.  For instance, you may use your personal vehicle to get to an important meeting, or you may use your personal vehicle for a business seminar you may be attending. It is extremely important that you clearly delineate what miles are used for business and what miles are personal.  A good rule of thumb is to keep a log of some kind to keep up with business miles.  

Now, since you are also using your personal car for business, you may be able to deduct the following:  car insurance, car repairs, tires, maintenance, etc.  Bear in mind that if you decide to deduct actual business expenses as it relates to your vehicle, you must know the actual percentage of business use.  This is done by dividing the total miles driven on the personal vehicle by the total miles driven for business.  (i.e., 10,000 total miles driven on vehicle, with 3,000 of those miles used for business.  Your percentage of business use of that vehicle is 30%)  Once you have determined your business use percentage then all actual business expenses on the personal car must be multiplied by the business use percentage in order to determine the actual business expense allowed as a deduction.  For example, let's say you purchased 2 new tires totaling $500.00.  You cannot deduct the total $500.00 because you have to take into account the fact that the car is also used as your personal vehicle.  Therefore, you must multiply the cost of the new tires times your percentage of business use (30%).  You can actually deduct $150.00 as a business expense on the cost of the two new tires. 

As you can see, it is extremely important that you understand what can be used as a business deduction and it is even more important that you keep good records.

Don't be overwhelmed!!  Just ask THE RIGHT PERSON the RIGHT QUESTIONS and you'll be fine.