Easily find the answers you’re looking for by browsing our FAQs. Select a category below to explore detailed questions and answers designed to guide you through every step.
Yes, you can deduct the business use of a personal vehicle.
If your vehicle has a gross vehicle weight rating (GVWR) of 6,000 pounds or more, you can deduct up to $26,200 of the cost in the first year.
There are two different methods to deduct the business use of your vehicle: Actual Expenses or Standard Mileage Rate. You must choose one or the other.
There are a variety of different apps that can track this for you. Lots of our clients like the app MileIQ.
The IRS specifies the following should be included in your mileage log: Beginning odometer, ending odometer, trip purpose, starting location, ending location, and date.
You should also document your odometer at the start and end of each tax year, if possible.
Yes, however it is best practice to open bank accounts for the business to keep your personal and business items separated.
Yes, you can use personal accounts and funds to contribute to the growth of your business. This is known as an owner’s contribution.
It is best practice to open a business brokerage account to show that the trading activity you have is for a business purpose.
This situation is often referred to as “holding in trust”. We recommend having a separate account that is just for this type of deposit. The deposit coming in will be classified as a “liability” because you have to pay it to someone else. When the time comes to send the money to whoever, you book that payment also to “liability”. Which zeroes out that amount.
For example, I receive $1,000 that I need to hold for 6 months. After the 6 months are up, I need to send that payment to a specific client Bob. When I get the $1,000 deposit, I book that to “Contract Payable”, a liability account. Six months later, I sent Bob the $1,000, and that payment will also be booked to “Contract Payable”. My balance in “Contract Payable” is now zero.
A taxable gain is often referred to as a capital gain. The gain that will be taxed is going to be calculated by taking your sale price minus your cost. For example, I buy shares for $2,000. I sell the shares for $3,000. My capital gain is $1,000. ($3,000 – $2,000).
Capital gains can be either short-term if I held the asset for less than a year or it can be long-term if I held it for more than a year. Short-term capital gains rate is your normal tax rate. (Boo!) Long-term rates are usually 15%. (They have a scale, but for simplicity, most people pay the 15% rate.) Then you have your state tax rate on tope of that.
We find using 20% as an estimated tax rate will be sufficient in estimating how much should be saved on any capital gains.
You can rent out your office however you would like throughout the year. It can be 14 days in a row all at once or spread out over the course of the year. Just make sure that you don’t exceed the 14 days per year.
Corporate Rent (also known as the Augusta Rule) is limited to 14 days or less per year.
Both LLCs can rent your home. However, if you rent your home out more than 14 days total to any combination of tenants then you will be required to report the rental income on your return. For example, each LLC could rent your home for 7 days, which would be a total of 14 rental days, which is fine.
Your business must be a partnership, C-Corporation, or S-Corporation to qualify for the corporate rent deduction.
It needs to be between you personally and the business stating the rate. Then when the meetings occur take meeting ‘minutes’ to record what was discussed. Then make the payment from the business to you personally for the agreed amount (and can also create an invoice in your records for more paper trail).
The corporate rent deduction is a tax strategy used to rent your personal residence to your business. Utilizing IRC section 280A, this can be done in a way where the business gets an expense deduction without needing to report the rental income on your personal tax return.
You do not need to qualify as a real estate professional to bonus depreciate your property, but without being one you are only allowed to take $25,000 of Real Estate losses per year.
We do not offer cost segregation studies in house, but we recommend reaching out to Kim Lochridge klochridge@engineeredtaxservices.com.
A cost segregation will allow you to bonus depreciate certain items related to the property. You can depreciate things like machinery, equipment, furniture and fixtures faster than you would be able to normally.
A cost segregation study should be completed on a purchased property before the taxpayer files their tax return for the year the property was acquired.
Log into the Client Portal using the link you received from us. Once you’re logged in, click on “Files” and click “Upload Files”. You can drag and drop files directly into your portal, or you can choose from documents stored on your computer.
Please keep in mind this is a true portal, meaning – once we pull your documents and save them to your file, they will disappear from your view. Don’t panic! They are safe and sound in your file on our end, no need to re-upload.
Yes the closing costs are tax deductible! They are amortized over 15 years.
Business owners can pay their children to help with tasks such as advertising or cleaning. If the business entity is a partnership, the child is exempt from FICA taxes until they turn 18. If the entity is a corporation, then FICA taxes must still be withheld for the child.
Health Insurance Premiums can be deducted as either 1) Self-Employed Health Insurance Premiums, if your business generates an income during the tax year, or 2) As a medical expense on form Schedule A, but only if you itemize your deductions (these are also limited based on your income during the tax year). Deductibility is limited if you are eligible for an employer sponsored plan.
IRC section 79 provides an exclusion for the first $50,000 of group-term life insurance coverage provided under a policy carried directly or indirectly by an employer. There are no tax consequences if the total amount of such policies does not exceed $50,000.
Only businesses that file as a Schedule C and have a profit for the year are eligible for the home office deduction.
There are two ways to deduct home office expense: Simplified or Actual
Simplified Method: $5/square foot and capped at 300 square feet totaling a maximum deduction of $1,500.
Actual Expense Method: Add the expenses actually paid including utilities, mortgage interest, repairs etc. Then multiply the total by the business use portion of your home to arrive at the expense. For example: a home office is 200 square feet in a 2,000 square foot home. Total expenses equal $2,500. The home office expense under this method would be $250.
In general per the IRS code “To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.”
The best proof that will satisfy the IRS will be receipts or bank statements to back up any of the business expenses you are trying to claim.
We would recommend using a business credit card to make these transactions so that all of your business expenses will be easily differentiated from personal expenses.
Do the best you can by putting expenses where you think they go. If some expenses don’t fall into a specific category on our organizer you can create a category that best matches your expense. When we receive your tax organizer at the end of the year we will reach out to you if we need clarification.
Click here for the Tax Organizer online form. We can’t start any tax work until this form is completed and all docs are submitted.
Email adminteam@incitetax.com for any links, spreadsheets, or templates we have available.
Click here to access our Business Income & Expense Tracker
Please fill out a separate tab for each business or rental. To return this to us, we’ll need it in an Excel format. You can do this by going to File > Download > Microsoft Excel and attach it to an email to adminteam@incitetax.com
If you use your own accounting software then you do NOT need to fill this out.
Profit-sharing is a feature that allows an employer (i.e. your business) to add more funds to your 401k above the max individual contribution amount. You have until the extension deadline to make any profit-sharing payments. If I’m filing a 2023 tax return, I have until the September 2024 extension deadline to send the money.
The profit-sharing amount is calculated based on your business’s Profit and Loss statements. In many cases, the 401k company is waiting on info from you. Our first recommendation is to be proactive and send your P&L statement to your 401k provider as soon as possible.
The second option is to estimate what you plan on using so that we can do a tax estimate for the April filing deadline. Taxes are always owed in April, even if you extend. Worst case scenario, you can always claim the profit-sharing payment on the following tax return.
If total startup expenses are less than $50,000, then up to $5,000 of startup expenses are deductible in the first year. The remainder are amortized over the next 15 years.
Here is a helpful video that will walk you through the main differences – www.youtube.com/watch?v=-R43ZItiJSA
No, you cannot deduct the expenses with your dogs, unless your dogs are part of your business.
It will be easier to track your meals if you get a separate check, but this is not required. You can only write off the business employees portion of the meal.
You can only deduct the expenses related to the business. If your family members are employees/officers in the company, then their business expenses can be deducted. Any expenses for family members that are not part of the business is not deductible.
For business travel, you can deduct any expenses that are ordinary and necessary for your business.
If you spend more than 75% of your trip doing business, then you can deduct all of your business travel expenses. If less than 75% of the trip is business related, then you can deduct the percentage of travel that is business related. This includes airfare, lodging, meals, etc.
Travel expenses considered extravagant are not deductible.
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