Personal & Business Taxes – San Antonio
Knowing how to differentiate between your personal and business expenses can save you not only money on tax payments, but from any potential errors which might land you in trouble with the Internal Revenue Service (IRS).
If you’re an incorporated business, deducting expenses help reduce your business taxes. If you’re a sole proprietor, it helps you decrease your regular income as well as your self-employment tax.
While the IRS offers both personal and business deductions, you must make sure that the business deductions are only related to your business.
Keep Your Personal and Business Expenses Separate
When it comes to calculating business deductions, it’s very important to keep your personal and business separate. While that sounds pretty easy on the surface, most people end up making a mess of their business expenses.
As a rule of thumb, expenses which are purely personal in nature – mortgage payment, home utility bills, movie / concert tickets etc – cannot be itemized as business expenses. If you try to manipulate the items, you might get away at first, but you’re going to be in legal trouble if the IRS picks you up for audit and you’re unable to justify the deductions.
As a result, not only will you lose the money from the tax deductions, but you’ll pay additional penalties as well. Moreover, depending on the severity of the evasion, things could also get much worse for you. It’s simply not worth the trouble. So be very careful about expenses itemized under business deductions.
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