Deduct Accounting Fees Paid to your tax professional

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Deduct Accounting Fees Paid to your tax professional

Mar 17, 2015 Posted by Sanjiv 1 Comment

Accounting Fees Deduction

The Internal Revenue Service is the authority of the tax code as approved by the Congress. The IRS deciphers the tax code and has the power to permit or deny deductions with regards to income reported by people and organizations.

When it’s time to file the tax return, individuals start panicking about the amount of money that they have to pay as tax. They try to find out ways to get some amount waived off or deducted in order to save money. One such expense that can be deducted is the fees paid for hiring a tax professional. This includes the charges that you pay for preparing tax returns, tax planning advice, procedures of collections and criminal investigations and also representation in tax audits. Bookkeeping charges are at the heart of estimating wages and taxes payable.

Tax payers getting returns prepared for individual expenses can deduct professional accounting fees as per Schedule A, under the miscellaneous itemized deduction. Conversely, tax payers depositing taxes for business enterprises can get specialized tax service fees written-off on relevant tax forms for their business. The absence of clarity in the code increases the importance of tax professionals.

 Is the expense ordinary?

A cost is deductible if it is recognized as ordinary to the course of business. As it were, you would be able to work together in some other path so as to evade the cost. The code gives a great deal of scope in order to figure out what is conventional, and this gives a lot of chance for bargaining and negotiation. Bookkeeping administrations come under the definition of ordinary expenses. Without them, an individual or organization will be unable to precisely ascertain their pay.

 Is the expense essential?

A second thought for an admissible derivation is whether the cost is important for the business. While taking the representatives out for frozen yogurt every week may not be essential, bookkeeping expenses are. Actually, the intricacies of the tax code make these expenses totally vital as entrepreneurs usually don’t have absolute knowledge about the tax code.

 What category does accounting fees tax deductions come under?

The tax code and guidelines for estimating income and tax payables more than once reference representing exchanges. This shows the importance of bookkeeping expenses, giving additional evidence that accounting expenses are an ordinary and essential cost and so it falls under the category of tax deductible. However, the accounting fee varies depending on the amount of work and the tax preparer.

 Types of accounting fees tax deductions

There are different expenses that you incur right from the stage of calculating the tax payable amount to filling forms, and then finally getting the tax deposited with the government. All expenses including accounting expenses, bookkeeping expenses and auditing expenses are come under accounting fees tax deductions. Take a look at a more detailed analysis of accounting-related expenditures that can be deducted:

  •  Fees for a professional – Accountant/Financial Adviser/CPA: The fees charged by professionals for reviewing accounting books or financial statements and financial planning can be deducted. However, this only includes tax processes that are carried out for the business organizations and not individuals.
  • Bookkeeping charges: Bookkeeping is the process of recording financial transactions conducted throughout the year for maintaining accounts and statements. Expenses incurred on bookkeeping, include both accounting software and bookkeeper costs.
  • Auditing: Public corporations go through audits. Expenses paid to auditing firms can be deducted.
  • Tax Preparation and Strategy: Certified Public Accountants, tax advisers or attorneys are hired to help with tax preparation and strategy. These professionals assist with filling and submission of forms. All expenses paid for these services can be deducted.
  • Defense Expenses: Travel costs and other expenses incurred as a result of problems with IRS, state agency audits or any other challenges, including costs charged by advisers for their services can be deducted.
  • Additional Tax Issues: You cannot be present at every audit or before the IRS at every event. CPAs or agents hired by you represent you during investigations, and then they charge you for the preparation and the time that they invest.

 When to make accounting fees tax deductions?

 Accounting fees for tax preparation can be deducted in the same year for which the fee was paid. For instance, if you have paid for accounting services in 2014 for preparing accounts and tax returns of 2013, then the deductions are made on the tax payable amount of 2014, since you are paying the fee in that year.

Where to deduct fees for accounting?

Publication 529 of the IRS provides an understanding on how the tax preparation fee needs to be recorded in the tax return for maximum savings. Expenses on tax preparing must be deducted on appropriate schedules. Take a look at the various schedules that you need to file the taxes under:

Business Profit or Loss – Schedule C or C-EZ

Farm Income or Expenses – Schedule F

  • Rentals or Loyalties – Schedule E
  • Preparing taxes of the remaining part of the return – Schedule A (Form 1040), line 22 or Form 1040NR, line 8

For an individual salary expense form, proficient tax arrangement charges can be deducted in the accompanying spots:

  • Accounting fees for tax arrangement identified with setting up sole proprietors Schedule C are deducted on Schedule C on grounds of lawful and expert charges.
  • Tax preparation fee identified with putting together Schedule E for rental salary and costs are deducted on Schedule E with regards to the lawful and expert expenses.
  • Tax preparation services identified with the preparation of Schedule F for income and costs of farm are deducted on Schedule F under the segment for different costs.
  • Expenses for tax preparation identified with different parts of the government form are deducted on Schedule A on line 22 as miscellaneous itemized deduction.

Keep all the above expenses in mind while recording the accounting fees transactions in your tax return and get the amount waived off in order to be able to reap maximum benefits.


car deduction

How to Make Tax Deductions for Cars and Trucks ?

Mar 5, 2015 Posted by Sanjiv No Comments

Cost of operating a truck, car or other kind of automobile is tax-deductible when moving and relocating or driving for medical, business or charity purposes. The deduction made corresponds to the mileage driven for such tax credits. You may opt for standard rate of mileage in place of calculating actual car expenditure for these individual tax credits.

Medical Purpose

Driving in order to obtain medical care for either yourself or your dependents is what Medical Purpose covers. This kind of drive must primarily cater for medical care, as indicated by IRS (Publication 502) and the deduction is reflected on Schedule A and comprises part of medical expenses for an individual.

Business Purpose

Business purpose pertains to driving away from your regular employment location to a different work site in order to meet with client or travelling for a business engagement. Commuting from home to office does not qualify for this category of individual tax credits. This kind of incentive is captured by Schedule C for self-employed individuals, Schedule F for farmers or as itemized deduction that forms part of unreimbursed business expenses provided in Form 2106 for an employee.

Moving and Relocating

You can deduct the driving cost for relocating to a new place of residence as part of moving expense deduction. To qualify for this incentive, it will be necessary to cover a distance of at least 50 miles away from the old home more than what you earlier covered in-between the old home and old job. The deduction is present on Form 3903.

Charitable Purpose

Individual tax credits are available for any vehicle used for providing services to charitable organization. The corresponding deduction is covered by Schedule A as part of charitable donations. It may involve driving for volunteer causes for a charity, church or hospital.

Actual Expenses

Various elements count as truck or car expense including:

  • parking fees and tolls
  • vehicle registration fees
  • interest on loan
  • rental and lease expense
  • vehicle registration fees
  • personal property tax
  • fuel and gasoline
  • insurance
  • depreciation
  • repairs including tires, oil changes and such routine maintenance

However, fines and tickets such as for parking may not be deducted. In addition, expenditure relating to commuting or personal use is not deductible. Various car expenses may also be deducted depending upon why you are driving. One cannot claim interest, insurance and depreciation as well as auto repairs for medical expense and charity deductions.

Standard Mileage Rates

Rather than tally up all actual car expenditures, you may utilize a standard mileage rate to aid in calculating deductions. There are standard mileage rates to achieve this goal. It is multiplied by the mileage drive to establish the dollar amount deductible for car expenses as obtained from Notice 2014-79 of IRS.

Standard Mileage Rates
Type of use Year 2015
Business 57.5 cents per mile
Medical or moving 23 cents per mile
Charitable service 14 cents per mile


In addition to standard mileage rate, taxpayers may also deduct tolls and parking fees as stipulated by the IRS in chapter 4 of Publication 463.

Comparing between Actual Expenses and Standard Mileage Rate

You may use any method that will lead to a larger amount of your tax deduction. This varies with individuals depending upon the number of miles driven, amount of depreciation claimed and other expense variables. Claiming standard mileage rate provides results with less paperwork. It is suited best for situations where the car is driven at times for charity, work or medical appointments and the owner is avoiding lengthy scrutiny of all car-related expenditure.


You will require selecting the standard mileage rate option within the first year of using your automobile for business purposes in order to claim the corresponding deduction. If you start by claiming actual expenses, it will be necessary to retain the actual expense option for the entire time duration of using your vehicle for business. IRS Publication 463 offers further clarity on this situation.

Where to Make Claims for Car and Truck Expenses

Expenses for vehicles get reported on Schedule C for self-employed individuals and Form 2106 for the Employee Business Expenses. In particular, this deduction is miscellaneous itemized deduction that is subject to 2 percent of the adjusted gross income limit. It implies that unreimbursed employee expenses may be deducted, although the tax payer does not benefit from the full deduction dollar-to-dollar on tax returns.

Vehicle expenses get reported on Schedule A for medical vehicle uses, together with other medical expenses.

For charitable car use, the expense gets reported on Schedule A, together with related charitable donations.

Practicing Good Record-Keeping

Ensure keeping a mileage log as it will demonstrate your eligibility for car and truck individual tax credits. This document should show date of each trip made that is tax-deductible. It will be necessary as well to record the total mileage covered for the entire year, which makes it pivotal indicating the odometer reading as each year begins at the first.

tax shelter for business

Tax Shelter Ideas

Feb 23, 2015 Posted by Sanjiv No Comments

Tax Shelter Ideas for Small Business Owners

In general, a tax shelter refers to a program which allows business enterprises or individuals to either defer or reduce payment of income taxes. Such programs may not suit everyone and legitimate ones do involve some level of risk, which not all investors are comfortable to undertake. However, with the correct information, the process of taking advantage of these shelters becomes less involving.

The Internal Revenue Service (IRS) applies huge discretion when applying tax shelters as this area has traditionally been prone to abusive practices by both individuals and businesses.

How IRS Views Tax Shelters

Tax shelters are defined by the IRS as investments that normally requires making substantial contributions which oftentimes are associated with commensurate risk levels. For an individual, tax shelter implies an investment which involves liability incurred within the short-term, with hopes of making appreciable gains across the long term.

For instance, if someone invested in property situated within a low-income environment, depreciation benefits of such property would be termed as legitimate tax shelter.

The losses or tax deductions which a person can take on potential tax shelter gets limited to total worth of investment or amount at risk. The amount viewed as being “at risk” for example might get limited to:

  • Adjusted basis of property
  • Cash invested
  • Loans taken for which someone bears personal responsibility to repay

Treatment of Losses

It is vital gaining the understanding that business activity losses or credits are easily considered passive activity losses or credits. These may only be utilized for offsetting income from different passive activities. You cannot utilize them for offsetting income sources like wages, dividends or interest. Passive losses generated in excess from any tax shelter can be carried forward, or till the investor sells off the asset.

Take care of tax shelters which get marketed with promises of write-offs being more significant that the invested amount. IRS considers such as Abusive Tax Shelters. People generally make investments with hopes of generating huge amounts of profits. Legitimate shelters involve a certain level of risk, cut down fairly on taxes and generate income. If IRS takes note of someone operating an abusive scheme, the individual is then required to pay tax owed along with penalties and interest.

Legitimate Tax Shelters

It is vital knowing how to identify a questionable program. You may achieve this goal by adhering to three primary rules in order to distinguish between legal and illegal tax shelters as follows:

  • If the primary purpose of a given transaction is lowering taxes and not offering other economic gains to parties involved, consider such a business deal unethical or questionable.
  • Transactions involving exchange of goods, assets or even services at prices which lie well below the fair market value should be viewed with suspicion.
  • If the interest rate paid to a different party is unusually high or low, with the sole intention being sheltering income from taxes, such an arrangement should be seen as unethical.

Tax Accrual Work-Papers

The IRS maintains a policy of requesting tax accrual along with other financial audit work-papers that relate to tax reserves. This applies to deferred tax liabilities and footnotes which disclose contingent tax liabilities that appear in audited financial statements.

Owning a legitimate auto repair business enables you take advantage of numerous tax deductions, which are unavailable to mere employees. This includes partial deductions to expenses incurred on housing, automobile, entertainment and meals as well as cell-phone expenditure.

While some expenses get deducted within a year, others get spread out over a number of years.

You can write off full cost of new furniture and computers within this year as per IRS Code Section 179. This might not be significant to a relatively new business that may not generate a lot of income within at first. A wiser strategy therefore might be deferring some portion of deductible expenditure to years in future, which accountants call “depreciation”.

You may deduct some portion of “start-up costs” if this year is your first in business. However, beyond a certain level you will require spreading the remainder of associated costs across your tax returns for the next several years. This practice is termed “amortization” in accounting.

Remember not to overlook the expenses below when filing tax returns:

  • Legal and Accounting Fees
  • Website/ Advertising costs
  • Association Dues
  • Truck and Auto Expense
  • Computer Expense
  • Bank Charges
  • Subscriptions and Dues
  • Training and Education
  • Furniture and Equipment
  • Home Office Expense
  • Gifts
  • Insurance
  • Permits and Licenses
  • Postage and Delivery
  • Meals and Entertainment
  • Printing
  • Office Administration Fees and Rent
  • Maintenance and Repairs
  • Start Up Costs
  • Retirement Savings
  • Materials and Supplies
  • Telephone
  • Travel
  • Taxes (Payroll Tax, Property Tax etc)

Knowing the tax code is important for anyone who owns a business and IRS Publication 463 spells out on available business tax credits relating to travel, entertainment, gift as well as car expenses. Think about hiring services of a tax professional to aid in preparing tax returns for your auto repair business.

Health Insurance Deduction

Feb 7, 2015 Posted by Sanjiv No Comments

Tax deduction is a big concern, and on the other hand it is highly beneficial because it can help you in various ways. Health insurance is one of the most crucial things that you can consider in your life. And although you may compromise on many things in life, health insurance is surely something where you don’t want to take a chance. This becomes more important when you know that tax deduction can considerably help you pay for the health insurance.

The Internal Revenue Service or IRS provides various kinds of deductions for medical expenditures. There are some itemized reductions. Thus, you can make claims for standard deductions. Again some medical deductions are over-the-line exemptions and so all these can be claimed in addition to the standard deductions. With regard to healthcare tax deductions, three options as mentioned below can be chosen.

      •  In case you find that your expenditure crosses 7.5 percent of the adjusted gross earning, then you could take an itemized reduction where your expenses surpasses the brink. By qualifying medical expenses, you could consider medical, vision or dental care for your own self, your spouse or any individual dependant on you. Medical services include the ones that would prevent problems that could arise in the future, solve present problems or reduce pains. Medical drugs which need a prescription can be deductible. Further, expenses that you may incur in due course of traveling to the hospital in the form of parking fees, mileage, tolls can also be included.
      • In order to save for future medical expenditure, health savings accounts are sheltered by tax. However, in order to be eligible for this, you also need to possess a healthy insurance plan which has a high deductible. Every year, your contribution can go up to a limit set on the basis of the fact as to whether the health insurance plan is just meant for you or also includes your family.
      • Health insurance deduction can also be seen when you are self-employed. If you are in a partnership or you are the owner of greater than 2% of a corporation, you would be able to deduct the price of your health insurance policy and also that of your spouse and any other individual dependant on you. But if you have to qualify for the deductions, your policy should be in your name, that is, the name of the self-employed person, business or partnership. In this deduction, qualified long-term care premiums can be included. But again, there is a limit to the deductible amount because the age of the insured plays an important role in this. This deduction would affect your income tax. But as far as the decrease of your tax liability is concerned, this deduction would not be of any help. As a self-employed individual, you could deduct health insurance premiums from federal income taxes. As a taxpayer, you would be offered huge exemptions that could bring down the taxable income and thus lower the total amount that you would pay in federal income tax.

In order to understand more about tax deduction and the way it helps health insurance, you should have the clear idea about the following.

If there is a group health insurance provided through an employer then the tax exemption can be enjoyed. In such a scenario, probably your employer is paying the premiums of your insurance from your gross income before holding back federal tax income. This way your yearly tax income comes down and thus you will have a reduced tax bracket. In case your employer is not offering health insurance, you should ideally buy an individual health insurance policy from a private insurance organization. This might also be the case if you prefer to have a completely different coverage plan other than what is available. But again in order to avail tax deductions on health insurance in this regard, you need to note that you will only be able to deduct your private health insurance premiums on your federal income taxes if they are greater than 7.5 percent of your adjusted gross earnings

Tax deduction can also be seen in long term health care. The number of adults who need long term health care is on sharp rise. With the constant increase of health care expenditure, it seems that every single year, insurance coverage is getting lesser with respect to the total expenses for health care. Here, if you can comply with certain qualifications, then you can deduct cost of long term health care on the returns of your income tax. There are certain long term medical care expenses which are deductible. These include the costs incurred for diagnosis, medical treatment, healing and preventing an ailment. Certain drugs which need prescription are also deductible. With respect to long term medical care, the expenses include the cost incurred on nurses or certain care facility on long term basis, provided these have been prescribed specifically by a doctor. Health insurance payments can be deducted by you in the total expense; but again you would not be allowed to take health insurance deduction pertaining to life and disability.

While availing the benefits that tax deductions can do to health insurance, you need to make a note that all deductions should be the expenses paid during the year of tax filing from January 1 to December 31. In case you are mailing a payment on the last day of a year, that is 31st of December then it will surely be considered to be the expenditure for that particular calendar year.

Writing off your summer vacation

Aug 17, 2013 Posted by Sanjiv No Comments

Summer vacations can burn a big hole in one’s pocket; however avoiding them is not the long term solution. Working without taking any vacations can kill a person’s work life balance. One has to sneak away to small trips now and then and yet have a check on the travel expenses. Here are a few ways on how to travel yet claim deduction on some of the expenses.

Combine business with pleasure

If a person travels to trips for business meeting he can also combine the trip to do something for his personal interest. There is no hard and fast rule to identify if a trip is for business or personal purposes. If the time spent for official reasons is more on a trip, then it is a business trip. Air fares are deductible expenses. Driving to the venue of meeting gives a whopping deduction of 56.5 cents per mile with the added benefits of parking and toll charges. The key to get travel expenses deducted is excellent documentation.

One must have a very good control of his travel expenses and know all the rules of the IRS thoroughly so that he can answer any query regarding his claim for deductions.  Business trips help to write off the entire transportation and lodging expenses can be claimed for deductions. 50% of the meal expenses spent on working days is also deductible. Hence if one travels with his wife, only the meal expenses have to be taken care of. There should be some reasonable justification to be provided before claiming some expenses as deductions.

Learn something

Enrolling in some courses while travelling is another way to save travel expenses. As long as the course is to improvise on one’s skills at work, the education expenses and the travel expenses can be written off.  One has to regularly attend these classes while travelling and have good records about all the paperwork that might be needed while claiming for deductions. These courses could be a business related seminar or a professional course that would help the person climb his corporate ladder effectively.

Lend a hand

Volunteering to do charity work while travelling can help in claiming tax deductions. This is one way to prove that the aim of travel is not for pleasure or personal purposes. One can choose to do charity work after office hours and get a deduction for all the out-of-pocket expenses one spends. Driving one’s car to the venue of the charity work also helps in deducting car expenses of 14 cents per mile. The parking and other toll expenses are also covered in these deductions.

Get healthy

If a person is suffering from a severe obese condition, then he can get himself treated at a spa for weight reduction and improving his general health. These medical expenses are deductable provided there is a statement from the doctor that the treatment was purely medical and not for pleasure. Driving to the medical center can help to deduct up to 24 cents per mile with the combined benefits of parking and toll expenses.

Avoiding IRS Tax Audit This Year

Jan 15, 2013 Posted by Sanjiv No Comments

There are many things that seem to raise the red flag every time a tax return goes to the IRS. This article is going to point out some of the reasons behind an IRS audit. These points tend to increase the probability that you are going to get an audit from the IRS at one point in your life.

The first thing that should always put you on the look out is if you make a lot of money. Generally, people who earn a lot of money tend to underpay their taxes. The problem is that while people make money, they tend to spend it on many different things and forget that they are required to declare all sources of income and pay the taxes that arise from such incomes. This means that there is always the risk that such a person is underpaying his taxes or not paying some of them at all. This is a matter of concern for IRS.

There is also the risk that such a person fails to report all of the taxable income from 1099’s or W-2’s reported to the IRS. This failure may be intentional or just out of ignorance.

Another factor to look into is the charitable deductions that you make or receive. Giving back to charity and accepting charitable donations is one of the ways in which many people keep off paying taxes. However, there are some deductions that are tax exempt while others are taxable. There are many other types of deductions that you should also look out for the home office deductions that are claimable the rental losses that you make, business meals and travels as well as entertainment expenses.

One of the common mistakes that many people make is to write off the losses that have been acquired from a hobby activity among the business losses. In some cases, business persons who use their vehicles for business activities tend to claim 100% of the use of the vehicle on the business. Some of these things almost always tend to raise red flags all over the IRS servers.

Other things that may raise the IRS red flags include running a cash only business, failure to report the foreign bank accounts that individual holds and trade in currencies. Even then, whatever the reasons that you may have, it is important to avoid IRS audits. Overstating deductions and profits in most cases also attracts the IRS to your doorstep.

This is why it is important to use professionals in this field to cover the loopholes that you may have had. Professionals will also help you better organize your financial returns and reduce the possibility of raising the red flag at the IRS.

1099 Independent Contractor Tax Deduction

Oct 13, 2012 Posted by Sanjiv No Comments

Recently we got a question asking about the tax deduction for the 1099 contractor. Caller wanted to know if he can deduct the travel expense from his home to his office.

In San Francisco Bay Area, many of us are 1099 contractors, working for consulting companies or own our small business. With gas prices reaching $5 per gallon, it is no wonder that we are starting to pay special attention to the travel expenses.

 Small answer, like always, to this question is – Yes, but it depends.

You can deduct travel expense from your office to your client site. Meaning, if you have a home office and you travel from your home office to your work than that expense can be deducted.

However, if you simply travel from your home to your work than that expense is not tax deductible.

 Set Up A Home Office To Take Tax Deduction.

Your home office should be separate place in your home that is dedicated as your office. There is no special rule that define what furniture or equipment you need to buy to claim a place as your office. However, your office should serve as your “HOME OFFICE”. Meaning you should be able to do operational task from such place. Moreover, this office space should not be used for personal use. It should be dedicated forth office use only.

With increasing number of audits from the IRS, I suggest that you keep a picture of when your office was set up. Taking your home office pictures can also help strengthen your position in case of the audit. Making a list of things you do from your home office can also help you establish your home office.




Tax Deductions for Independent Contractor or 1099

May 13, 2012 Posted by Sanjiv No Comments

Starting out a consulting business can be very lucrative. However, it can also result in heavy tax bill you do not organize your income and expense properly.   So, how do you organize your income and expenses?

You can start by opening a different bank account.  Do not mix your business bank account with your personal bank account. All business related income should come to this account and all expenses should be paid from this account.   Your client will send you form 1099-misc at the end of the year.  IRS will also reactive a copy of this 1099.  That being said your total business income should be greater or equal to the amount listed in 1099.  You may get an automated customer generated audit if you report total income less than the amount listed on your 1099.  Keeping a separate bank account will help in calculating total business income and you act as proof in case of audit.

Now you need to deal with your business expenses.   Easiest way to do this is to categories your business expenses.   We recommend you use same or similar categories listed on schedule C.  This will help during tax time.  Now, every time you pay a bill, you simply need to enter that transaction in the correct category.  You can use a simple spread sheet, financial software or you can use shoe-box.  Most CPA firms also provide bookkeeping services. For example, you can simply send us your bank statement at the end of the month and we can do the complete bookkeeping. We will assign each expense into an appropriate categories based upon its tax implication.

What are some of the most popular business expense categories ?

  • Advertising – All expenses paid for online marketing or print marketing including business cards or flyers.
  • Consultation Fees – Fee paid to professionals like attorney, CPA, or marketing professionals.
  • Insurance Cost –  Business Insurance Expenses including life, property & casualty, or business insurance
  • Interest Cost – Interest cost of your business loans. You can include fees and other related cost.
  • Office expense – Any supply or equipment you purchase for your business operation.
  • Rent or lease other business property – Cost of operating your business office.
  • Repairs and maintenance – Include all cost related to your business only.
  • Travel – the cost of traveling to a business related event like convention, meeting, or business trip
  • Meals and entertainment – You can include meals and entertainment expenses related to your business.
  • Utilities –electricity, gas, telephone, internet
  • Other expenses – such as Dues & Subscriptions, Web development, and Business telephone expenses.


Health Insurance expenses:  Premiums paid for your health insurance are tax deductible.   You can deduct the full cost of health insurance premiums on form 1040 but you must have an Income from you business.   You can deduct the health insurance cost event if you run into losses but it has to be reported different.  Consult with your CPA to ensure you are reporting the deduction properly.

Still have a question about your business expense?  Leave us a comment or call our office at 510-825-7563

How To Deduct Commuting Cost ?

Mar 19, 2012 Posted by Sanjiv 2 Comments

Have you thought about deducting your commuting expense?  Most of us living in Bay Area drive a long distance to get to work and would love deduct our growing commuting expense. So, here is what you need to know about deducting commuting expenses

Self-employed or contractors (aka 1099 employees) can take advantage of deducting commuting cost.  You can establish a home office and deduct cost of travelling between your home office and any other location where you conduct work-related activity.  Activates such as meeting with clients for interviews or business presentation can be consider as work related.

To take advantage of this kind of deduction, you must have a home office aka principle place of your business.   You can only deduct commuting cost from “principal place of your business”.  Good news is that you get to decide where you want to set up your “principle place of you business”. Consultants and self employed will find it very convent to set up their residence as their principal place of business.  Please note that in order for your home to qualify as “principal place of your business” it must be used regularly and exclusively for management and administrative functions of your business.

Now that you have your base office established, you can deduct your commuter cost between your home office and work locations by car.  You can write off the standard business mileage allowance or you can write off the actual expenses including depreciation of your vehicle.

You take the deduction by filing Schedule C if you are a single member LLC or sole proprietor or on Schedule E if you are partner or member of multimember LLC.

Still have question about deducting your commuter deduction – simply leave us a comment here.

Tax Forms & Publications

Dec 28, 2011 Posted by deepak No Comments


All Tax Forms are available from the IRS website. We have provided all the links for quick reference.

Publication 1 Your Rights As a Taxpayer
Publication 3 Armed Forces’ Tax Guide
Publication 15 Circular E, Employer’s Tax Guide
Publication 15A Employer’s Supplemental Tax Guide
Publication 17 Your Federal Income Tax
Publication 51 Circular A, Agricultural Employer’s Tax Guide
Publication 54 Tax Guide for U.S. Citizens and Resident Aliens Abroad
Publication 80 Circular SS – Federal Tax Guide for Employers in the U.S. Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands
Publication 225 Farmer’s Tax Guide
Publication 334   Tax Guide for Small Business
Publication 463 Travel, Entertainment, Gift, and Car Expenses
Publication 501 Exemptions, Standard Deduction, and Filing Information
Publication 502 Medical and Dental Expenses
Publication 503 Child and Dependent Care Expenses
Publication 504 Divorced or Separated Individuals
Publication 505 Tax Withholding and Estimated Tax
Publication 509 Tax Calendars
Publication 510 Excise Taxes
Publication 513 Tax Information for Visitors to the U.S.
Publication 514 Foreign Tax Credit for Individuals
Publication 515 Withholding of Tax on Nonresident Aliens and Foreign Corporations
Publication 516 U.S. Government Civilian Employees Stationed Abroad
Publication 517 Social Security and Other Information for Members of the Clergy & Religious Workers
Publication 519 U.S. Tax Guide for Aliens
Publication 521 Moving Expenses
Publication 523 Selling Your Home
Publication 524 Credit for the Elderly or the Disabled
Publication 525 Taxable and Nontaxable Income
Publication 526 Charitable Contributions
Publication 527 Residential Rental Property (Including Rental of Vacation Homes)
Publication 529 Miscellaneous Deductions
Publication 530 Tax Information for First-Time Homeowners
Publication 531 Reporting Tip Income
Publication 535 Business Expenses
Publication 536 Net Operating Losses
Publication 537 Installment Sales
Publication 538 Accounting Periods and Methods
Publication 541 Partnerships
Publication 542 Corporations
Publication 544 Sales and other Dispositions of Assets
Publication 547 Casualties, Disasters, and Thefts
Publication 550 Investment Income and Expenses (Including Capital Gains and Losses)
Publication 552 Recordkeeping for Individuals
Publication 554 Older Americans’ Tax Guide
Publication 555 Community Property
Publication 556 Examination of Returns, Appeal Rights, and Claims for Refund
Publication 557 Tax-Exempt Status for Your Organization
Publication 559 Survivors, Executors and Administrators
Publication 560 Retirement Plans for Small Business
Publication 564 Mutual Fund Distributions
Publication 570   Tax Guide for Individuals With Income from U.S. Possessions
Publication 571 Tax-Sheltered Annuity Programs for Employees of Public Schools and Certain Tax-Exempt Organizations
Publication 575 Pension and Annuity Income
Publication 583 Starting a Business and Keeping Records
Publication 587 Business Use of Your Home (Including Use by Day-Care Providers)
Publication 590 Individual Retirement Arrangements (IRAs)(Including SEP-IRAs and SIMPLE IRAs)
Publication 593 Tax Highlights for U.S. Citizens and Residents Going Abroad
Publication 595 Tax Highlights for Commercial Fishermen
Publication 596 Earned Income Credit
Publication 598 Tax on Unrelated Business Income of Exempt Organizations
Publication 721 Tax Guide to U.S. Civil Service Retirement Benefits
Publication 901 U.S. Tax Treaties
Publication 907 Tax Highlights for Persons With Disabilities
Publication 915 Social Security and Equivalent Railroad Retirement Benefits
Publication 919 How Do I Adjust My Tax Withholding?
Publication 925 Passive Activity and At-Risk Rules
Publication 926 Household Employers Tax Guide
Publication 929 Tax Rules for Children and Dependents
Publication 936 Home Mortgage Interest Deduction
Publication 939 General Rule for Pensions and Annuities
Publication 946 How to Depreciate Property
Publication 950 Introduction to Estate and Gift Taxes
Publication 954 Tax Incentives for Empowerment Zones and Other Distressed Communities
Publication 957 Reporting Back Pay and Special Wage Payments to the Social Security Administration
Publication 967 The IRS Will Figure Your Tax
Publication 969 Medical Savings Accounts
Publication 970 Tax Benefits for Higher Education
Publication 1212 List of Original Issue Discount Instruments
Publication 1542 Per Diem Rates
Publication 1544 Reporting Cash Payments of Over $10,000