Tax Deductions Archives

From Commingled to Contested: The IRS’s Audit of Tax Deductions

The common idea that business expenses are deductible while personal expenses are not is an oversimplification. In reality, the tax rules are more nuanced. Some personal expenses are deductible, and the line between personal and business expenses is often blurry. This complexity is further compounded by the fact that many businesses, particularly small ones, fail…

The Tax Treatment of Pre-Start-Up Costs

Can you deduct costs incurred while investigating whether to start a business? What if you spend several years researching, planning, and preparing to launch and you incurred costs during these years to do so? Are these expenses deductible in the years before your business officially begins operations? Does the answer change if the business actually…

Strategic S Corp Conversion to Avoid Tax Basis Limitation

Time. We can’t stop it, but we can use it. We can use it to take advantage of compounding to grow our savings. We can use it to pay down debt to increase equity. And we can use it for tax planning. Time is one aspect of tax planning. It can help taxpayers avoid just…

Accounting for Interest Deductions as a Tax Planning Option

Tax attorneys frequently come from an accounting background. This may seem like an unrelated skill, but it often plays a pivotal role in effective tax planning. The ability to navigate revenue and expenses and debits and credits not only ensures accurate financial reporting but also lays the foundation for strategic tax planning. Tax planning often…

The Qualified Nonpersonal Use Vehicle

What Congress provides with one provision, it often takes away with another. This can result in legal challenges whereby the court creates exceptions. The exceptions can be modified and qualified by later legislation. This creates a labyrinth that one has to navigate to determine how an item is treated for federal income tax purposes. The…

Website Development Tax Deductions & the Start-Up Rules

There are several tax laws that have to be considered to determine when and how costs to develop websites are deductible. These expenses are almost always deductible. These tax laws raise timing questions. It’s a matter of when the expenses are deductible. For those who are developing website businesses as side-hustles, the issue takes on…

Reporting Illegal Income to the IRS (It’s All About Choices)

Assume you commit a crime and receive a financial windfall. Then you get caught and have to repay the windfall in the form of restitution. Further assume that you have three options when it comes to reporting and paying tax on the illegal income: (1) you file tax returns to report the income and you…

IRS Documentation for Travel Expenses

Business travel expenses are deductible. These are expenses for business trips and work trips, such as car and truck expenses, airfare and hotels and lodging. It can also include travel meals. Those looking to deduct business trip expenses are running a risk as the IRS frequently disallows these expenses on audit. It does so even…

Charter Boat Expenses are Miscellaneous Itemized Deductions

We live in a complex society. Even common activities can be exceedingly complex. Take a charter boat operation, for example. One has to consider the various laws for registering the boat; laws that dictate where and when the boat can operate; the laws governing the crew and its activities; and financing and loan and insurance…

Tax Deductions Associated With “Other Income”

The IRS was recently given a significant increase in its budget. Its request for more money was premised on the need to hire more IRS revenue agents to audit more non-compliant tax returns. While the IRS has in fact reduced its headcount significantly, it has also benefitted from recent tax law changes. Some of these…