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Deductions and Write-Offs

What to pay out of business account?

Asked Wednesday, December 08, 2021 by Katie M.

Hello Katie,

In order to answer your question properly, it is important to know the tax structure of your business; is it a corporation, Single-member LLC or sole proprietor.

Since we can only deduct the portion of your home that is used exclusively and regularly for business (the rule of thumb for the percentage to be in the range of 5-20%), I would advise you to pay for the expenses out of your personal accounts, then record the deductible portion on a monthly basis on a separate sheet. At the end of the year or on a monthly basis, provide an employee reimbursement report to your company for payment.

In general, the deductible portion of the mortgage, real estate taxes, utilities, and insurance need to be booked as "due to shareholder". Once it has been paid by cutting a check or transferring the money out of your business account to your personal account, you will need to reverse the entry by getting rid of your account "due to shareholder" and reducing your cash balance.

Hope my answer helped.


Answer Provided by: personimage Ragi Riad

Deductions and Write-Offs

Actors...!?

Asked Tuesday, December 07, 2021 by Scott Y.

Hello Scott,

Unfortunately, the value of time or service is not tax-deductible, but any expenses that incur due to the pro bono work that are directly related to the charity are tax-deductible.

Answer Provided by: personimage Ragi Riad

Deductions and Write-Offs

Are advertising expenses deductible for a W2 employee?

Asked Saturday, September 25, 2021 by Lloyd S.

Unfortunately, I have some bad news for you. As a result of the Tax Cuts and Jobs Act (TCJA), starting with 2018, no unreimbursed employee business expenses (that would include marketing/advertising) are deductible anywhere on your individual income tax return. Prior to TCJA, if employees had out-of-pocket expenses for which they were not reimbursed, they could attempt to deduct them on Schedule A (itemized deductions) to the extent they exceeded 2% of adjusted gross income. So such expenses were tax deductible, but in actuality, it was still difficult to actually get any tax benefit because you had to clear that 2% threshold and then you still needed to have enough itemized deductions to itemize.

Instead of just leaving you with an answer but no possible remedy, I have two ideas.

First, see if you can get any business expenses reimbursed by your employer. If they reimbursed the exact amount of expenses you turned in (and substantiated with receipts), the reimbursement would be tax-free to you AND a business write-off to the employer. A win-win for both of you and a LOSE for IRS. Perhaps negotiate this instead of an increase in pay in the future.

Second, see if you can create a sole proprietorship (be an independent contractor) on the side with other clients. That opens up the possibility for you to deduct some (not all) your business expenses. It would be illegal/unethical to deduct business expenses that relate directly to your work as a W-2 employee, but you could deduct expenses that relate directly to your status as independent contractor as well as expenses that benefit both activities.

If you found this helpful, I would really appreciate if you could leave a Google review for me (Adam Dickreiter) by following this link https://g.page/adam-dickreiter-cpa-pllc/review?gm or doing a Google search for my name.

Alternatively, you could leave a review on this website by following this link: https://cpadirectory.com/certified-public-accountants/texas/san-antonio-tx/adam-dickreiter/1061467 or searching on this website under Find an Accountant > All CPAs. I am ranked on top on this website, as I have answered many questions from the public, so it’s easy to find me.

Adam Dickreiter, CPA

Answer Provided by: personimage Adam Dickreiter

Deductions and Write-Offs

Independent Contractor + Employee

Asked Tuesday, September 21, 2021 by Amy H.

First, congratulations are in order.

To answer your question, yes, it is possible to be both an independent contractor and an employee at the same time. Having said that, hopefully, you are not serving in both capacities for the same individual/company, as that would be questionable. So, if you are an employee for one company, but you’re an independent contractor serving your own clients on the side, there is no problem there.

Come tax-time, you will receive a Form W-2 for your work as an employee. You will continue to report your income as an independent contractor the same way you have done in the past (assuming you’ve been an independent contractor prior to 2021). In your question, you don’t state how you’re filing as an independent contractor, so I cannot speak to that issue.

To answer your last question, you cannot write off any of the expenses related to your work as an agent against your employee income. As long as you have income as an independent contractor, you can continue to write off your agent expenses. The only issue is that you don’t want to end up with a loss, as you could be subject to the hobby loss rules.

If you found this free advice helpful, please leave me a review, either through Google (search for Adam Dickreiter or by using the following link https://g.page/adam-dickreiter-cpa-pllc/review?gm) or through this website (CPAdirectory).

Answer Provided by: personimage Adam Dickreiter

Deductions and Write-Offs

501c3 in kind donation writeoffs

Asked Tuesday, September 21, 2021 by Matthew T.

First, thank you for your service! You are correct that she cannot “give” you $180 worth of service AND expect a write-off at the end of the year. This is a black and white issue. She can certainly donate her services, but she cannot get a write-off. The Internal Revenue Code never allows a donation for services or time. You can pay her, and she can donate the $180 back to the 501(c)(3); however, that’s not in the best interest of the farrier. She could end up paying more tax that way because she could be subject to both income and self-employment tax on the $180 of income. Then, she may or may not get the value of the $180 donation back to the organization. So tax-wise, it may not be a wash for her. It’s best for everyone if she simply donates her time and gets no write-off.

If you found this free advice helpful, please leave me a review, either through Google (search for Adam Dickreiter or by using the following link https://g.page/adam-dickreiter-cpa-pllc/review?gm if it is active) or through this website (CPAdirectory).

Answer Provided by: personimage Adam Dickreiter

Deductions and Write-Offs

How to file taxes for 3rd party delivery

Asked Wednesday, June 16, 2021 by Stan S.

Because DoorDash, GrubHub, and Uber Eats are all online food ordering and delivery platforms, you’re basically doing the same activity, just for different companies. Therefore, IRS will consider them one business. You should file just one (1) Schedule C for all three activities. On the other hand, if you were also doing a completely different activity, such as landscaping, you would need to file two (2) separate Schedules C, one for the online food delivery activity and one for the landscaping work. May you have a successful and safe business!

Answer Provided by: personimage Adam Dickreiter

Auto & Truck Expenses

2018 - Luxury Automobile Depreciation Limits

Asked Monday, December 24, 2018 by an anonymous user
Section 280F limits the ยง179 expensing and depreciation deductions (including bonus depreciation) with respect to certain passenger automobiles.

For passenger automobiles placed into service after December 31, 2017 the maximum amount of allowable depreciation is increased to $10,000 for the first year;
$16,000 for the second year; $9,600 for the third year; and $5,760 for the fourth and later years. Each of these amounts will be indexed for inflation in years after 2018.

The maximum first-year bonus depreciation (which was scheduled to reduce to $6,400 in 2018 and $4,800 in 2019) will remain at $8,000.

For property placed into service after December 31, 2017, qualified leasehold improvement, qualified restaurant and qualified retail improvement property will be subject to a 15-year recovery period and straight-line depreciation.
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Depreciation

2018-Bonus Depreciation

Asked Thursday, December 20, 2018 by an anonymous user
100% additional first-year bonus depreciation is allowed for qualified property acquired and placed into service after September 27, 2017 and before January 1, 2023.

The new rules eliminate the requirement that the original use of the property commence with the taxpayer. As such, bonus depreciation is available for new or used property.

Taxpayers have a right to elect 50% bonus depreciation for property placed into service after September 27, 2017 during the first tax year that ends after September 27, 2017.
In the years that follow the bonus depreciation percentage will diminish. i. For property placed into service after December 31, 2022 and before January 1, 2024 bonus depreciation is 80%.
ii. For property placed into service after December 31, 2023 and before January 1, 2025 bonus depreciation is 60%.
iii. For property placed into service after December 31, 2024 and before January 1, 2026 bonus depreciation is 40%.
iv. For property placed into service after December 31, 2025 and before January 1, 2027 bonus depreciation is 20%.
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Mileage Rate Deductions

2018-IRS mileage allowance

Asked Thursday, December 20, 2018 by an anonymous user
The IRS standard business mileage rate for 2018 is 54.5 cents a mile
.
The rate for medical expense and moving expense for certain military personnel deductions is 18 cents a mile.

For charitable volunteers the mileage rate is unchanged at 14 cents a mile.
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