Small Business

Voluntary payments to a union strike fund are not deductible.

Dues paid the chamber of commerce are deductible if it is conducted to advance the business interests of its membership. It is deductible as a miscellaneous itemized deduction on IRS Schedule A subject to the 2% MAGI limitation.

Dues paid a community booster club conducted for the purpose to attract tourists and settlers to the locality where the members do business are deductible as a miscellaneous itemized deduction on IRS Schedule A subject to the 2% MAGI limitation.

Swimming lessons even if prescribed by a doctor are nondeductible.

The costs of purchasing and maintaining a guide dog or other animal for a visually-impaired, hearing-impaired or physically disabled person is deductible as a medical itemized deduction on IRS Schedule A subject to the 10% / 7.5% MAGI limitation.

Most individuals and many sole proprietors with no inventory use the cash method because they find it easier to keep cash method records.
However, if an inventory is necessary to account for your income, you must generally use an accrual method of accounting for sales and purchases.
Generally, if you produce, purchase, or sell merchandise in your business, you must keep an inventory and use the accrual method for purchases and sales of merchandise.
However, the following taxpayers can use the cash method of accounting even if they produce, purchase, or sell merchandise. These taxpayers can also account for inventorial items as materials and supplies that are not incidental . A qualifying taxpayer under Revenue Procedure 2001-10 in Internal Revenue Bulletin 2001-2. or A qualifying small business taxpayer under Revenue Procedure 2002-28 in Internal Revenue Bulletin 2002-18. You are a qualifying taxpayer if: Your average annual gross receipts for each prior tax year ending on or after December 17, 1998, is $1 million or less. (Your average annual gross receipts for a tax year is figured by adding the gross receipts for that tax year and the 2 preceding tax years and dividing by 3.) Your business is not a tax shelter, as defined under section 448(d)(3) of the Internal Revenue Code.
You are a qualifying small business taxpayer if: Your average annual gross receipts for each prior tax year ending on or after December 31, 2000, is more than $1 million but not more than $10 million. (Your average annual gross receipts for a tax year is figured by adding the gross receipts for that tax year and the 2 preceding tax years and dividing the total by 3.)
You are not prohibited from using the cash method under section 448 of the Internal Revenue Code.Your principal business activity is an eligible business (described in Publication 538 and Revenue Procedure 2002-28) Business not owned or not in existence for 3 years.
If you did not own your business for all of the 3-tax-year period used in figuring your average annual gross receipts, include the period of any predecessor.
If your business has not been in existence for the 3-tax-year period, base your average on the period it has existed including any short tax years, annualizing the short tax year's gross receipts.

Taxpayers are entitled to deduct any expenses for using their homes for business purposes if the expenses are attributable to a portion of the home or separate structure used Exclusively and On A Regular Basis as the principal place of any business carried on by the taxpayer (occasional use is not sufficient) or a place of business that is used by clients, customers, patients, in meeting or dealing with the taxpayer in the normal course of business. If the taxpayer is an employee, the business use of the home must also be for the convenience of the employer. A home office deduction may be claimed if the taxpayer regularly and exclusively uses part of the home for conducting the administrative or management activities of the business. Home office expenses may include real estate taxes, mortgage interest and operating expenses such as insurance and utilities and also depreciation. Home office deductions may be limited. The allowed deduction is calculated and reported on IRS Form 8829 and then transferred to the taxpayers Schedule C. There are certain tax consequences of claiming a office in the home deduction. A consequence occurs when the taxpayer sells his residence. Current law allows a $500,000 exclusion on the sale of a residence ($250,000 for non joint returns). If a residence is sold with a home office, the gross sales price must be apportioned over the residence and the business office. A taxable gain on the sale may occur. If a residence is sold without a home office the full exclusion may be taken. Some CPA's suggest not claiming a office in your home for the two years prior to the sale of the residence. Speak to your local CPA about your specific circumstances to work out a strategy that works for you.

Taxpayers are entitled to deduct any expenses for using their homes for business purposes if the expenses are attributable to a portion of the home or separate structure used Exclusively and On A Regular Basis as the principal place of any business carried on by the taxpayer (occasional use is not sufficient) or a place of business that is used by clients, customers, patients, in meeting or dealing with the taxpayer in the normal course of business. If the taxpayer is an employee, the business use of the home must also be for the convenience of the employer. A home office deduction may be claimed if the taxpayer regularly and exclusively uses part of the home for conducting the administrative or management activities of the business. Home office expenses may include real estate taxes, mortgage interest and operating expenses such as insurance and utilities and also depreciation. Home office deductions may be limited. The allowed deduction is calculated and reported on IRS Form 8829 and then transferred to the taxpayers Schedule C. There are certain tax consequences of claiming an office in the home deduction. A consequence occurs when the taxpayer sells his residence. Current law allows $500,000 exclusion on the sale of a residence ($250,000 for non-joint returns). If a residence is sold with a home office, the gross sales price must be apportioned over the residence and the business office. A taxable gain on the sale may occur. If a residence is sold without a home office the full exclusion may be taken. Some CPA's suggest not claiming an office in your home for the two years prior to the sale of the residence. Speak to your local CPA about your specific circumstances to work out a strategy that works for you.

Generally your freelance job will issue you 1099-MISC slips for earnings more than $600. The gross amount of your freelance jobs should be reported on IRS Schedule C along with the corresponding expenses. The net amount of this business income is subject to Federal tax and Social security taxes. The federal tax will be calculated on the tax bracket you fall into Also, the net amount of your business multiplied at .9235 multiplied at .133 will equal your social security tax. If wages exist the social security tax may be reduced. This calculation is done on IRS Schedule SE. The net business income will be subject to state tax depending on your state. Speak to your local CPA about the tax consequences of your freelance job(s).).