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When you’re self-employed or you own a small business, it can be difficult to keep track of the little expenses you can claim to minimize your tax obligations. One of the things that many individuals forget on their taxes are the vehicle-related expenses they’re entitled to. It’s the little things like this that can add up and really make a difference in how much you save when tax season rolls around.
Use an auto log to track your applicable mileage. You must be able to provide dates of travel along with the reason for the travel.
Keep a record of parking, tolls, transportation costs primarily for and essential to medical care and other miscellaneous travel expenses.
If your employer reimburses you for business mileage, make sure their reimbursement rate reflects the rate change for travel.
Keep record of your medical mileage even if you do not think your medical expenses will exceed the 7.5% of threshold income needed to use your medical mileage as an itemized deduction.
Plan your business trips to make certain your business mileage is deductible.
Charitable mileage is one of the more frequently overlooked deductions. This includes mileage deduction for volunteering at a charitable organization.
The following rates apply to personal cars, minivans, trucks, SUV’s and panel trucks when claiming business mileage deductions.
Note: Commuting to and from work is not deductible when you are an employee.
Many of us need to keep records that validate our tax return or for other important life events for as long as they are needed. Here are some basic rules of thumb to help you with what documents are needed and which are not.
1099-B Reporting – Beginning January 1, 2011 the IRS finalized a new 1099 regulation in recording and reporting the cost basis on certain securities.
Transfer agents and brokers are now required to report the costs of your investments you sold during the year to the IRS. This basis amount will be used by the IRS to review and audit your reported gains or losses on the sale of the reported investments.
New 1099-K – You may receive form 1099-K if you use credit card processing services or other similar transactions. This form is being sent to the IRS to make sure small businesses are not under reporting their revenues.
If you receive these forms it is important to make sure the amounts reported are correct.
The more you claim on your taxes, the less money you owe to the IRS. It’s important to make sure that you claim everything you’re entitled for in order to save as much money as you can on your taxes. This means you should consider looking into whether you can claim your personal work space as a home office deduction.
To qualify as a business deduction, you must use your home as your principal place of business or as a place where the taxpayer meets customers, clients, or patients in the normal course of business, regularly and exclusively. The amount you can deduct is limited to the percentage use of your home office.
To calculate the percentage use of your home office, you would need the total square footage of your home and square footage of the space designated for your home office. Then divide the area that is used for business by the total area of your home.
When deducting expenses for the business use of your home, you need to separate the expenses of operating your home between personal and business use. Examples of expenses are real estate taxes, deductible mortgage interests, insurance, repairs and maintenance, security systems, utilities, etc. Nonetheless, going about a home office deduction is far simpler than it used to be.
If you are self employed, you would need to use IRS form 8829, Expenses for Business Use of Your Home, to report the deductions. These deductions would then be able to reduce any self employment tax, if applicable.
If you are an employee, you would report your deductions on IRS Form Schedule A, subject to the 2% of your Adjusted Gross Income limitation. The home office deduction for employees must be for the convenience of the employer in addition to having the office be used regularly and exclusively for job related activities.
Sometimes, going through these forms can be tricky. If you have any questions about the process, don’t hesitate to call Larry L. Bertsch at (702) 471-7223. Having a professional CPA at your side during tax season can help you eliminate the stress and obtain the most in deductions to save you money.
