Small Business

Costs incurred while entertaining customers, prospective customers, clients, suppliers, employees and other business associates are valid business expenses that are subject to conditions and restrictions. For entertainment costs to be deductible, the following must be documented: the time, place and nature of the entertainment, a description of the business purpose involved, the amount of each separate expense, the business relationship and identification of the persons entertained. A calender diary is recommended to maintain this information.

Generally, meal or entertainment expenses will be deductible with certain limitations as long as the meal or entertainment expenses are "directly related to" or "associated with" the active conduct of your trade or business and are not extravagant or lavish under the circumstances. Deductions are generally limited to 50% of the cost. Detailed recordkeeping should be kept to verify the deductions. Some locations considereed as entertainment venues are: nightclubs, cocktail lounges, theaters, golf and athletic clubs, country clubs, and sporting events.

You may not deduct the cost of renting, maintaining or operating facilities to entertain. Examples of facilities would include yachts, boats, lodges, fishing camps, apartments, hotel suites or homes in a vacation area. The no-deduction rule applies to rent, depreciation, maintenance and operating expenses. It does not apply to the food and beverage costs incurred when entertaining in the facility.

Generally, the deduction for business gifts is limited to $25 a year for each recipient, if the gift is made to an individual or partnership.
There is no dollar limit on the deductibility of a business gift made to a corporation or business entity. Gifts to a corporation or other business entity intended for the eventual use or benefit of a owner, shareholder or employee is subject to the $25 limitation.

Whether you choose the actual auto expenses, including depreciation or lease payments, or use the mileage allowance method, you can still deduct the actual business tolls and parking expense costs.
You should maintain a record of the expenses and keep your receipts to verify the deduction.

Payments for the services of a child under age 18 who works for his or her parent in a trade or business are not subject to social security and Medicare taxes if the trade or business is a sole proprietorship or a partnership in which each partner is a parent of the child.
If these payments are for work other than in a trade or business, such as domestic work in the parent's private home, they are not subject to social security and Medicare taxes until the child reaches age 21.
However, Payments for the services of a child under age 21 who works for his or her parent, whether or not in a trade or business, are not subject to federal unemployment (FUTA) tax. Payments for the services of a child of any age who works for his or her parent are generally subject to income tax withholding unless the payments are for domestic work in the parent's home, or unless the payments are for work other than in a trade or business and are less than $50 in the quarter or the child is not regularly employed to do such work.. Speak to your local CPA if there is a question of whether a worker is covered by Social Security.

MACRS is the abbreviation for Modified Accelerated Cost Recovery System. It is a statutory method of depreciation allowing accelerated rates for most types of property used in a business or income producing activities.

The cost of installing a safe for storing investments in your home is deductible on IRS Schedule A as miscellaneous deduction, subject to the 2% Adjusted Gross Income limitation.

A business plan serves as your business' resume. It precisely defines your business and identifies your goals. Its basic components include a current balance sheet, income statement and cash flow analysis. A business plan is a crucial part of any loan package. It illustrates to suppliers, personnel and other parties about your goals and operations.