Business owners are consistently eager to maximize their income tax deductions. This leads them to obtaining assistance from licensed tax professionals. Changing tax laws and the complexity of calculating some types of deductions is best conducted by IRS registered tax return preparers.
Some expenditures qualify as business expenses only if specific rules are followed. One purpose of registered tax return preparer study is providing the tools necessary to accurately assess legitimate tax deductions. Business expenses are a prime area of tax work requiring expert interpretations.
The guiding principle learned in RTRP training is that business expenses are only tax-deductible when they are ordinary and necessary. In addition, extravagant business expenses are not allowed as tax deductions. For example, business owners are permitted to deduct costs incurred for entertaining clients. In fact, tax preparer education reveals special rules for entertainment costs beyond the ordinary and necessary requirement.
Consequently, tax preparation services record a business owner's cost for tickets to a sporting event in most cases. The tax preparer confirms that business matters were discussed either during the event, immediately preceding the event, or immediately after the event. The same rules apply to other activities, such as fishing excursions.
A home office is another type of business tax deduction with special rules. Clarity about a home office deduction is first discovered in an RTRP exam study guide and reinforced with annual CPE courses. The most important assurance about a home office is that it must comprise an area used regularly and exclusively for business. Any exception to this standard results in disqualifying a home office deduction. The IRS frequently catches false home office claims, so tax preparers help business owners avoid this undesirable event.
A basic guideline about business deductions is that expenses of a personal nature are almost never tax-deductible. For instance, business owners have been disallowed by the tax courts from deducting costs for a personal wardrobe, manicures, or hair care - despite claims of the business significance for a nice appearance.
The worst consequence of questionable tax deductions is that they draw IRS scrutiny. Therefore, a full IRS audit is more likely when red flags appear. The IRS expects that it can uncover other problems by digging a little deeper. Tax preparation help from a professional aims to avoid IRS trouble. This assures that all business expense deductions follow specific rules, are accurately calculated, and are supported by records acceptable to IRS standards.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.