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Prepared by Stephan Bourget & Rosanne Hartwick
Marvin D. Krueger, CPA, CMA gave a free seminar for
Independent Representatives April 12, 2003 and listed over 50 ways you
can document and deduct business expenses from your U.S. Income Taxes, and
added 8 generally overlooked other areas.
As the IRS requires written documentation to qualify for
the deduction, NOW is the time to start keeping your receipts! Where
applicable, I have added a note or two to clarify how to document these
expenses.
Here is his list of potential deductions for your business:
- Your Account portfolio / Stat-up kit.
This is the membership expense that actually starts your business. (Use
your Account documents to document, or your canceled check.) In
Synergy, there is actually no start-up cost.
- Your Sampler Kit. In order to
understand and market your company’s unique products, you need to use
them yourself. Sampler kits provide you with the most popular products
for you to try, and convert your house at the same time. (The company
provides receipts for all purchases, keep for tax time.)
- Your Monthly Purchases. These
purchases, when "required" in order to get a check (no
purchase, no check), are tax deductible. As many of the benefits
from using products come in the long-term, we must become a
"product of our products", the daily/monthly usage does this.
Many CPAs confuse this with a Distributorship
where you have to buy, inventory, and resell products. In those
businesses, your purchases are not deductible. However, when monthly
qualifying purchases are destined to the end customer, meaning your own
consumption, they can be deducted. (Document these purchases with the
packing slip/invoice in each order. Don’t forget the sales tax and
shipping is included in this deduction!)
- Your Home Office. Create one area in
your house to do your Business from. It can be out of a closet, a desk
in the corner of a room, a full room, or an office created out of some
of your garage space, the only requirement is that it be used
exclusively for business. If your desk is in the TV room, you can’t
deduct the whole room, just the area that you actually work in. The
percentage of the house used for business calculates the part of the
following that you can deduct from your taxes: (Document with receipts.)
- Rent (if you own your home with the bank, the
interest, taxes, etc. are applied elsewhere)
- Electrical Bill
- Sewer Bill
- Insurance (not deductible at all, unless you have a
home business!)
- Cleaning Service (as long as they clean where your
office is too!)
- Garbage service
- Water Bill
- House Repairs
- Landscaping (if people come to your house on
business)
- Training Expenses. (Document with
receipts)
- Seminars
- Books
- Cassette / CD programs
- Training Conference Calls
- Advertising Expenses.
- Like company's apparel? If it has the logo, it is an
advertising expense.
- Giving a gift? If company's product, or company's
branded clothes, treat as Advertising.
- Newspaper ads
- County Fair / expo booth fees.
- Flyers
- Product Samples
- Company Literature
- Reproduction costs (photocopies, etc.).
- Labor Expenses paid to your children for
Business related work. (Up to $4700 in 2003). Keep track of what
is done, and how much paid, pay by check, canceled check is proof. NO SSN
OR INCOME TAXES need to be paid on your children!
- Emptying the Garbage
- Mowing Lawn, other Landscaping
- Cleaning your office.
- Filing.
- Computer work (Most kids are better at computers
than we are!)
- Envelope stuffing/postcard stamping, other mailing
tasks.
- Other business related items.
- Convention
- Travel to pre-arranged presentations. (Going to
visit your sister? Put an ad in their local paper two-three weeks
before, coordinate several appointments, and your trip is deductible
(within some limits). Is your wife/husband going? Are they working with
you in the business, and will they be at the appointments? Their trip is
deductible too!
1.
Air fare, train fare, and car mileage.
2.
All "fees" related to travel – parking, tolls, security,
etc.
3.
Meals while on the trip (subject to limitations).
4.
Entertainment expenses (subject to some rules and limitations).
- Paper clips, printer paper and toner, light bulbs,
pens, pencils, highlighters.
- White boards, easels, presentation flip charts
- Furnishings (Chairs, desks, lamps, carpet, etc.)
- Equipment (Computers, printers, fax machines, PDAs,
phones, etc.)
- Phone bill (If you only have one phone, only the
long distance calls related to business, the IRS believes that one line
is a ‘necessity’ and will not allow that as a deduction).
- Special services on your phone bill (three-way
calling, call waiting, voice mail).
- Second line used for business. (Document business
usage by adding to your business card/stationery.)
- Cell Phone. (Document business usage by adding to
your business card/stationery)
- ISP account and e-mail. (Document business usage by
adding to your business card/stationery. Document fees by printing
billing from your ISP.)
- Data processing costs for business report.
- Postage for business mailings.
- Business Meals. When you do a
presentation at a restaurant/coffee shop, pick up your receipt! This is a
deductible expense (50%).
- Celebration Expenses. Giving a party to
celebrate? Make it a business event. Invite your business
associates/prospects and deduct the entire cost! (Make sure you celebrate
your business!) Document via receipts and invitation list, have attendees
sign a "guest book" to document who attended.
- In-home expenses.
- Baby Sitters.
- Product cases (for carrying display product in/out
of house).
- Demonstration supplies.
- Assistants (read: your children, if old enough).
- Food provided (100%).
- Snacks/Tea/Coffee/Attain Shakes (100%)
- Mileage to/from presentations, training events,
product launches, etc. (36¢ per mile this year!) Document with
mileage log. Do for three consecutive months, or three like periods,
extrapolate totals to full year (multiply by four). IRS requires some sort
of logical, written documentation of this. If your day planner does not
have a good sheet for this, check out on the web for one, or make your
own. It needs date, purpose, start mileage, end mileage, total mileage on
the trip, and total mileage for the month. You will also need the year’s
start and ending mileage numbers off of your car’s odometer for the tax
form.
Now for some "General" tax issues that you should be looking at,
if not using:
- 401K. Usually set up by an employer,
often with matching funds. If you have the option, you should be
contributing. Start low on the percentage scale and move up with each
raise (add 1% to your contribution). Your contribution is not taxed until
you take it out, and if your company is matching a percentage of your
contribution, you are almost guaranteed to come out ahead!
- College Tuition Deduction. With some
income limitations, allows up to $3,000 deduction for college tuition in
2002 and 2003, $4,000 in 2004 and 2005. Expires at the end of 2005, and
cannot be taken in the same year, for the same student as the Hope or
Lifetime Learning Credits (below).
- Hope Credit. Designed to help pay for
the first two years of college for yourself or your children. 100% of the
first $1,000 and 50% of the next $1,000, for a total credit potential of
$2,500! Student must be enrolled at least halftime, and in a program
leading to a recognized credential or degree.
- Lifetime Learning Credit. Covers up to
20% of the first $5,000 spent on updating or learning a new job skill.
Maximum credit per year of $1,000 per family (Husband/wife).
- Car Lease. Look at the lease/purchase
decision VERY carefully! Usually the lease option is best for those that
do not drive a lot, because the lease penalties for going over the
anticipated mileage are very severe. (We have a friend who parked his
leased car for a year to get the mileage back into the lease zone, and he
still had to pay the lease and insurance on the car!)
- Want to help your grandchildren who don’t live
with you? Set up a Coverdale Education Savings Account for them.
You can contribute up to $2,000 per year, and the money can be used for
college or qualified Kindergarten – 12th grade expenses also
(read that "Private School". Also check out your State and
Federal "Section 529" savings plans.
- If you’re concerned about Capital Gains on the
sale of your home. Don’t take the depreciation part of the Home
Office Deduction. Up to $500,000 of the Captial Gains is fully tax
sheltered, if you have lived in the house for at least 2 years.
- Staying at a Friend’s house while on business?
Give them a gift in return, and deduct the amount as lodging for the trip.
Cash or product are both OK (of course, I always give a gift of my
company's products, especially if they are not yet customers, it breeds
interest! Limitation: Cannot exceed the cost of average hotel room in the
area. (You can get the government’s idea of "average" for an
area by searching for the US Government "per diem" rates on the
Internet).
Taxes are a VERY complex issue, and no widespread communication like this
would be complete without the "boiler plate" disclaimer:
All of the above information is advisory and educational. It MAY NOT apply
to you and your circumstances in any given year. If you have any questions
about your specific situation, consult a qualified Tax Professional.
Finally, YOU know your personal situation better than anyone will
from a 45-minute interview at tax time. I would highly suggest that you
purchase a copy of TurboTax or its equivalent and prepare your own
taxes, for submission, or for organizing yourself before visiting your tax
professional for the final "tweaks" and areas the program does not
cover. It will save you LOTS of money, either way, and is tax deductible to
boot.
- I learned of the Hope Credit through the tax program:
$325 credit. (1,000% return on the TurboTax investment!)
- If you have your taxes "done" each year by a
professional, the time spent organizing your paperwork for a computer tax
program will:
- Reduce your fees, because the accountant will save
time by not having to organize them for you.
- Raise your knowledge level so you can give your
accountant all he/she needs to qualify you for ALL the deductions you
deserve.
- Allow you to better evaluate your accountant’s
services, as they relate to your situation.
- Improve your filing system to reduce your time and
fees even more for next year!
Congress GIVES us these deductions to ENCOURAGE small businesses! Please
use all you are Qualified to receive!
For further information, click
here.
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This article is sent by Stephan Bourget.
Tel.: 1-418-664-0785
Web: http://www.mynewsuccess.com
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