Posted on September 24, 2010August 15, 2017 by Jan Roberg

Small Business Bill Passes!

The small business bill that’s been kicking around in Congress (for what seems like ages) has finally passed. I usually don’t get too excited about small business bills because what Congress considers to be a small business is much bigger than the business I’m in or the ones that I work with. I have what’s called a “micro business”, us micro business owners work alone or have up to three employees. I even belong to a group called “Tiny Business/Mighty Profits”, we’re all in the same boat–we own tiny businesses and hope to earn mighty profits. We’re like the silent majority of the business world, we’re out there in great numbers but we are not who Congress is catering to with their tax bills.

Congress generally considers small businesses to have 100 employees or less. There are different standards for different industries. For example my industry is tax preparation. According to the standards set forth by the U.S. Small Business Administration, to qualify as a small business, a tax preparation service’s annual receipts must be $7 million dollars or less. I’m definitely in the “or less” category.

For us micro business owners, most of the legislation allowing increased deductions for new equipment and research and development won’t be affecting us. We’re not big enough to even reach the limits that were already available.

But the small business bill does throw a bone to us little guys! Now, we can write off our health insurance as an expense against our business income. We’ve been able to take a deduction for our health insurance to offset our regular income in the past, but now our health insurance reduces our self employment tax. Last year, I paid $6,000 for my private health insurance. Self employment tax is 15.3%–that would save me $918 on my health insurance. Woo Hoo!

The best part–this new rule is retroactive for the 2010 tax season. The worst part, is it’s only good for the 2010 tax season. It may be a one shot wonder, but take it while you can get it.

Posted on September 22, 2010August 15, 2017 by Jan Roberg

Is a Flu Shot Good for Your Business?

I got my flu shot yesterday and I’m writing it off as a business expense. I wasn’t going to get one. I’m reasonably healthy (knock on wood) and I’m not in any of the target groups susceptible to the flu, so I wasn’t going to bother. What I didn’t know, was that without a flu shot I could be a carrier and infect other people with the flu. In my business I meet with hundreds of people during the height of flu season. I don’t want to be responsible for getting any of my clients or their family members sick.

But writing it off as a business expense? That might seem like a leap, but it’s really not. Every year when I’m preparing other people’s taxes, I write off all types of vaccinations for health care providers because it’s an ordinary and necessary part of their jobs. I write off hepatitis vaccinations for people in the food industry because it’s an ordinary and necessary cost of working with food.

The key phrase here is “ordinary and necessary.” It’s a term the IRS uses a lot in their small business publications. I honestly believe that protecting my clients from a potential life threatening illness is an ordinary and necessary part of my business. If you work with people, especially if you deal with senior citizens or children, protecting them is indeed ordinary and necessary. Therefore, in my professional opinion, a flu shot is a legitimate business expense.

One final thing, much to my surprise — it didn’t hurt!

Posted on September 20, 2010May 31, 2016 by Jan Roberg

Can You Claim a Home Office Deduction?

For many people who own their own business, claiming a home office is a great tax deduction. Some people who work for employers can also claim a home office, but they must also meet the requirement that it’s for the benefit of the employer. What about you? Should a home office deduction be on your tax return this year?

The first criteria for a home office is “regular and exclusive”. This basically means that you have a defined space that is only used for business. It doesn’t mean you have to have four walls, your defined space can be a section of another room. For example, let’s say you have a desk in your bedroom that you do your office work out of. You make your business calls there, the computer is there, it’s your business headquarters. Your bedroom can’t be your home office, but that corner of your bedroom certainly is. Many people think that since they don’t have a dedicated room to call an office that the home office deduction isn’t available to them. That’s not true. Let’s say that this guy’s bedroom is 12×14 feet. His office space is basically his desk, his chair and a file cabinet that takes up about 5×8 feet. His home office space is 40 square feet. Granted, that’s not much of an office, but it’s still going to help reduce his taxes and that’s the whole point isn’t it?.

Let’s go back to the “exclusive” use idea again. Let’s say you’re using your kitchen table for you office. (To be honest, it’s my favorite place to work.) The problem is, because its the kitchen table, it doesn’t qualify as exclusive use. Come five o’clock (at least at my house) I clean the table off and get ready for dinner. I actually have another spot in the house that I do claim as my home office, and I really do work up there. It doesn’t mean I never work at the kitchen table, it just means that I don’t claim the kitchen as my home office.

The concept of office space as a function of business is changing. How many people do you know would say their office is at Starbucks? The cab of their truck? Wherever their Blackberry is? (The IRS doesn’t yet allow Starbucks receipts to be claimed as office rent expense, but I wish they did.) For many people, these places really are their offices, but they still need a place where they can regularly store paperwork and/or product and receive mail. Starbucks may seam like your main office, but I would argue that you could also claim a home office deduction if you made space for it.

Now if you actually meet clients in your home, the home office deduction is almost a gimme. Also, if your home has a separate structure where you do business, that’s pretty much guaranteed. Qualified daycare providers have special rules for claiming the home office deduction, but they definitely are able to claim a portion of the home expenses against their business income.

So what home office claims are going to get denied? Well, one example that didn’t work was a woman who had a party plan business. Every week she was hosting parties in her home for 10-20 couples selling her product. She had claimed her whole house as a home office business deduction because the guests had full run of her house during the weekly parties. Right about now you may be wondering, “what the heck was she selling anyway?” Pretty mundane stuff actually. If you’re selling a home party product like Avon, or Pampered Chef, you can claim a home office deduction for the storage of your product. You can also claim office space for your administrative duties. I would even go so far as to say you could claim an area of your home if you used it exclusively for your home parties on a regular basis like this woman did. But, claiming your whole house (including your kid’s bedrooms, your bedroom, your kitchen, your personal bathroom) …that’s not going to fly.

Many people are afraid that a home office deduction guarantees an audit. That’s not the case. But, there are trip points that will make the IRS look closer at your return like claiming the whole house in the example above. Be sure to have a professional prepare, or at least review, your return when you claim a home office. The money you spend up front will be well worth it in the time and taxes saved.

Posted on September 1, 2010May 31, 2016 by Jan Roberg

Open letter to Charlie Dooley

Dear Mr. Dooley,
I read in the St. Louis Post that you recently released your personal income tax return for public inspection. I do taxes for a living so of course I had to check. The first thing I noticed is that you prepare your own taxes. The second thing I noticed is that you missed a big deduction. Mr. Dooley, you forgot to claim the real estate taxes that you paid in 2009. You missed out on a $1,056 deduction (real estate taxes paid is public record.)
Mr. Dooley, the tax money you would have saved on this deduction alone would have covered the cost of having your return professionally prepared. Who knows what else you could have missed that I can’t just pull up on the internet.
Mr. Dooley, I’m looking forward to seeing you in my office this coming February. If you’re going to be making your tax returns public, they’d better be right.