“We can write it off.” Those magic words are music to any business owner’s ears. With all the expenses and risks that a business owner has to handle, it’s a relief to be able to ease that burden with some write-offs during tax season. But as the old saying goes, you CAN have too much of a good thing. Write off the wrong things and your business could be subject to fines, back taxes, even the dreaded audit.
It’s critical that you speak to an accounting professional to make sure that your write-offs are on the up and up. It can be confusing figuring out what can and can’t be deducted, something that we at Hacker Accounting know all too well. We’ve helped many businesses over the years make sense of their write-offs while making the most of them. We know what pitfalls you need to avoid when it comes to deductibles. Here are seven things that your business should never write off.
The costs involved in getting you or your employees to work is NOT deductible. No matter how long the commute distance may be, it is considered a personal expense. Nor is it deductible if you’re working WHILE you’re commuting.
On the other hand: business travel expenses can be written off, provided that all expenses can be shown to be business related. So you could bring your spouse and write off their expenses IF they are associated with your business. If they’re coming along just to keep you company and not as part of your company, then it’s considered a personal expense.
Related: How to Prepare for Tax Season
Telephone Land Line
You cannot deduct the cost of your home’s main telephone land line. The first hard-wired phone line in your home is considered a nondeductible personal expense, even if you primarily use that phone for your business. You can, however, deduct the cost of business-related long distance charges on that phone. And if you want to install a second telephone land line for your business, its full cost would be deductible.
Your computer, much like your telephone land line, is considered a personal expense. Unless you can prove that you ONLY use that computer for business purposes, it cannot be written off. If it’s possible, you’re better off getting a dedicated computer for your business and using a separate computer for personal, non-business related use.
If you have a car that was specifically bought and designated for work use only, that is deductible. Your car from home that you drive to work everyday is NOT deductible. If you only own one vehicle, you won’t be able to prove that you only use it for business.
You can mix business with pleasure all you want, but you can’t deduct pleasure. So if you want to take your clients to an amusement park, you’ll be able to write off anything you eat as an expense but not anything else you do. If you can prove that trip to a Broadway show was a legitimate business expense, you MAY be able to write it off, but it’s ambiguous. And when it comes to doing your taxes and dealing with the IRS, ambiguity is not your friend.
If you work from home, you can’t write off landscaping, gardening or tree removal as a business expense. Those are considered a personal expense. You can write off some of your utility bills if you set up a home office, but you’ll need to establish the specific dimensions of your home office. It’s important that you keep your personal and work spaces separate. If you add a nursery to your home office, it’s no longer considered a work space.
Anything that you wear to work that you could also wear outside of work is not tax deductible. So even if you wear a nice suit to work everyday, you should never write off your dry cleaning bills. You CAN deduct clothing expenses if the clothes are a uniform and something that you can only wear at work.
Need more help figuring out what your business can write off or never write off? Hacker Accounting can help you separate the deductible wheat from the chaff. Give us a call at 602-375-5251.