Calling the millions of dollars that is overpaid to the Internal Revenue Service (IRS) each year, "a widespread epidemic", the Tax Recovery Group (TRG) is releasing their list of the top ten most often missed business tax deductions.
Failing to utilize these deductions accounts for the majority of businesses overpaying their taxes, which, according to statistics, businesses throughout the country overpay their taxes to the sum of millions of dollars each year. This list is the result of TRG's work with thousands of businesses over the years for which they have recovered millions of dollars from the IRS.
Listed in no particular order:
- Home Office Deductions - If a taxpayer runs a home office they are entitled to deduct expenses for the percentage of square footage the home office is occupying. Expenses include the combined total of mortgage interest, property taxes, utilities, repairs, etc. For example, if 250 square feet of a 1,000 square foot house is being used for a home office, the taxpayer is entitled to deduct a quarter of their total expenses.
- General Business Expenses - Often, business owners will use their personal money or property for business expenses and will fail to deduct it. For example, one makes a trip to Staples to purchase some office supplies and pays for their purchase using their personal cash but fails to account for or deduct the expenditure.
- Imputed Interest on Corporate Shareholder Loans - If a shareholder loans money to his corporation he is required to charge interest on it. The shareholder would be required to report the interest as income on his personal return, but the deduction on the corporate return can be used to reduce wages resulting in a refund of Social Security and Medicare taxes. This deduction is very often missed.
- Meals/Entertainment Expenses - Similar to the general business expenses deduction, many times business owners will use their personal money to pay for meals or entertainment expenses. This would include items such as entertaining clients.
- Personal Assets Converted to Business Use - In many cases when a person starts a business, he uses personal assets to get the business going.
The best example of this would be using a computer bought with personal funds for business use. The fair market value of these converted assets can be a business deduction starting with the date of conversion.
- Self-Employed Health Insurance - As of the 2002 tax year, those who are self-employed are entitled to deduct 70% of their health insurance premiums.
- Company Entertainment - Company holiday parties, barbecue's or other forms of entertainment are often paid for with personal funds and are not accounted for or reimbursed.
- Communications Expenses - Anytime a personal cell, telephone or Internet connection is used for business use, that is an additional deductible expense, which is often missed.
- Fuel Tax Credit - Fuel that a business uses for off-highway equipment or machinery is entitled to a fuel tax credit. For example, if a landscaping company purchases fuel to power it's lawnmowers or other equipment; they are entitled to a credit.
- Automobile Expenses - Often, personal vehicles are used for business use but the individual will fail to deduct for mileage and other related automobile expenses.
"Although some of these deductible expenses may seem minor at the time, over an entire year, they can add up to thousands of dollars that an individual business is unnecessarily paying the IRS," said Brace Barber, President & CEO of TRG.
For more information visit http://www.trginc.us
or call (800) 714-3504.