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Common Business Tax Expenses

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Other Business Expenses

Insurance Premiums

If you are self-employed, the cost of your insurance is deductible. There are limitations, however. You cannot claim deductions that exceed your business net profit. Also, it is not offered to you if you were qualified to another medical plan. For example, if you are covered under a plan offered by your spouse's employer you cannot claim a deduction.

Retirement

If you are self-employed and contributing to a retirement plan such as a SEP-IRA or a Keogh, you can deduct those expenses from your personal income.

When filing returns, show all documented information, names, and identification numbers exactly as they appear on government records. If any of the information does not match government records in the Social Security or IRS database, your paperwork will be sent to an error file. This can cause an assortment of other problems for your business.

Travel

You can deduct the cost of travel as long as it is business related. This includes meals, accommodations, plane fare, and other expenses. If your trip involves both business and pleasure, it is still okay to deduct travel expenses as long as business was the primary reason for the trip.

Keep all your receipts, particularly if you are in a cash-business, as an auditor would suspect you of diverting funds to your own pocket without declaring them on your returns. Also, document all your travel and entertainment expenses because, if audited, you will have to provide plausible explanations.

Business Entertainment

You can deduct 50% of the expenses incurred entertaining your clients; the only exception, where you can deduct 100% of the cost, is if you pay for a social event for your employees and their families.

Bad Debt Charges

As a rule, if you sell goods you can deduct the cost of these goods if you did not receive payment for them. It may seem unfair, but if your business provides services rather than goods, you will not be able to claim a deduction for a delinquent or deadbeat client. The rationale is that a service provider would be able to inflate bills and claim this deduction later.

Interest

Interest and carrying charges on loans, credit cards, or other forms of financing are deductible for business debt.

Software

Software must be depreciated over a 36-month period. You may be eligible to deduct the whole amount during the current year if you meet certain guidelines.

You can avoid raising red flags with the IRS when you spend a large or disproportionate amount for one item or service by breaking down the total into smaller components and providing good descriptions for each part.

Charitable Contributions

If you own an LLC, partnership, or S corporation, you can make a contribution from the company and pass on the deduction to your personal income taxes. Your company will claim the contribution if it is a C-corporation.

Note, if you have old equipment that is not fully depreciated, you can donate and claim a tax benefit.

Child Labor, employing your children

If you are a sole proprietorship or a partnership you can deduct the salary you paid to your children as a business expense. Moreover, if your child is 17 years old or younger then there is no social security tax.

Make sure you file all payroll tax returns and make the tax payments. Also, the IRS is more likely to audit businesses that hire independent contractors(aka 1099's), because these workers provide tax savings over a regular employee.

Ask a professional

Managing all of the different aspects of your small business is a complicated and challenging task, and taxes are particularly difficult. An accounting professional can provide you with advice on what type of business entity you should form and what accounting software is best for your business. An account will also help you with your employer taxes and other tax issues. An accountant is an important partner in your business

For more information, refer to:

New York State Department of Taxation and Finance
The New York State Department of Taxation and Finance has created an informative Web site for New York businesses. It provides information on business taxes, New York tax-incentive programs, outreach events, information on tax benefits for small business, and more.
Visit http://www.tax.state.ny.us for more details.

The Web site also provides tax-benefit information through the Empire Zones Program. Empire Zones (EZs). These zones are geographically defined areas that offer special incentives to encourage business development and job creation. Prospective employers that meet certain criteria may be eligible to receive tax credits and have access to various resources including vacant land, a skilled workforce, and existing infrastructures to conduct business. Go directly to http://www.tax.state.ny.us/sbc/empire_zone.htm to learn more.

For more information about business taxes visit http://www.irs.gov/businesses/index.html