What are the expenses that qualify as a small business? It is never easy to interpret what those tax authorities are saying, right? A means and way to reduce your expense in every small possible way to ensure cosseting measures. This deduction, according to Code 162 of Internal Revenue Service is allowed for "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business". Traveling expenses, entertainment expenses, rentals and allowances paid to employees are in the broader sense of expenses. 'Ordinary and necessary' is defending by the IRS in their own way.

Please do not maker the mistake of putting your personal expenses under the business head. And make sure your expenses are small and should be in proportion to the charge. Do not, even remotely try to make payments to persons who are your relatives, they will suspect and monitor in a very close way. So, what are the expenses that qualify for tax deduction? The vehicles that you use qualify for that and two ways can be used to calculate this. The first is the standard mileage method whereby the sum is deducted on the per mile formula devised by IRS. The second is the actual expense method under which you deduct the actual costs you have incurred in operating the vehicle.

Include depreciations charges, plus your gas and maintenance bills under this method. Entertainment of customers is a major head where you will be given the deductions and it is only up to 50%. Verify that the expense is related only to business and not for any social or personal purpose. Current expenses like rent, office supplies, electricity etc.

can be deducted from this year's expense and they form a huge chunk of your bill. File all your bills and make sure you have them accounted for properly. The big brothers are really bad and never know what they are upto.if the government is allowing you to do things in a legal way, why not make the most of it.

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