Do you know which expenses are tax deductible? Be careful what you list down and think hard if they’re considered deductible otherwise you’ll have Internal Revenue staff raising their eyebrows on you.
You’ve probably read a lot of tax tips to help get you through tax season, and you’ve probably read things you think are tax deductible you should list in your report. Before you prepare for the next tax time hauling receipts from your business travels and expenses on meetings, let’s get some things straight.
Here are a few of the common things people list down as tax deductible, that isn’t always is.
If you work unreasonably far away from your home you’re aware of but still chose to, you can’t deduct that commuting costs to the IRS, regardless if you take your own car or via public transportation, it was a choice you made. The IRS has requirements when deducting expenses of this type.
However, if you work a second job or travel to a work location from your first or primary job, you may able to deduct the transportation expenses from traveling strictly from your main job to your second or work location only.
This may be surprising especially to those self-employed and single parents. But childcare costs, whether with a babysitter or in daycare, are completely not deductible. The reason for this is that childcare isn’t connected to business operations hence, it’s not determined as a compulsory expense.
This is one of the common deductibles taxpayers overlook. Yes, there are tax deductions for business travel, but you have to ensure the meeting/travel was strictly for business, not for pleasure. The IRS or your tax accountant will make sure only the business-related costs are deducted.
Say, for instance, you fly to a business meeting or conference in Australia and lodge there for another day or two. The meeting was only held for a day which means the additional day (or two) is for pleasure. Hence, these costs are not deductible. You’ll have to shoulder the expenses for the additional number of stay; if you have your wife or children with you, you should cover their tickets and lodging.
Glad to hear you’re donating to charities! But hey, just because it’s a non-profit organization does not automatically mean donations to that organization are tax deductible. You should know which charities and organizations are qualified; this way you can choose where to donate your money and feel good about it. Also, this will allow you for deductions.
Unrecorded cash transactions
Chances are, you’ll use cash as a mode of payment here and there even in your business. You pay for some business supplies and equipment in cash as well as make cash donations to charities.
What you do then if there’s no receipt, you write the number down and put it in the books. The thing here is if this doesn’t match your outgoings on your business account, you could get in big trouble which may result in legal consequences. So, always ask for a receipt and have it named for your business.
Have you encountered these mishaps? Share us your tax season experience!
About Chie Suarez
Chie is a daytime writer for Depreciator – Tax Depreciation Schedule, a company dedicated completely to Tax Depreciation Schedules that aids the Australian property market.