February 2024 Newsletter

Don’t wave the white flag when it comes to claiming legitimate tax deductions!

We frequently hear from new clients that their previous accountant advised them not to take valid legitimate business expenses because they supposedly raised “red flags,” which is what we assume the accountant means will increase the likelihood of an audit of their tax returns.

Some of these were the most common expenses for business owners such as claiming a home office, bonus depreciation, business use of vehicle, and business meals.

Well, we’re here to tell you that these expenses do not in fact raise red flags with the IRS. When claimed for legitimate business reasons, these are all valid business expenses!

Here are just a few examples, and our reasoning behind why we think you should claim them:

Home Office Deduction

What’s the adage amongst us small business owners? “We don't work 9 to 5, we work start to finish,” which means that we take work home with us at night and on weekends. We can’t just sit down at the dining room table to work. Especially not with kids running around, cats knocking over our coffee cups, the spouse telling us to fix the something, (which we will get to…at some point, agh!). We need to have a dedicated space with little peace and quiet that we can focus on the task at hand…and that space is your home office. The home office deduction has its own tax form, for crying out loud!

Bonus Depreciation

The use of bonus depreciation is a huge tax benefit, and a boon for the entire economy, which is exactly why this deduction exists in the first place.

Business Use of Vehicles

This is a strange one not to consider a business expense. Unless you’ve figured out the science behind teleporting to your clients/customers meetings, then the business use of a vehicle is as much a necessity to your business as a hammer is to a carpenter.

Business Meals

Now this is one that can get abused. Not every meal you eat will be a business meal. However, there is no reason why a business owner should shy away from taking advantage of this valuable benefit. A good meal can grease the wheels and help close a sale. It could also be the reward for your team hitting a goal, such as a well-earned beer after a long (so very long) tax season!

Some taxpayers are uneasy about being aggressive, and they prefer to take a conservative or “fly under the radar” approach to their tax planning. We completely respect that. But there is a big difference between being conservative and robbing your business of legitimate expenses. Our philosophy around this is simple: as long as we don’t lie, we don't cheat, and we don't steal, then we don't have to worry about “raising red flags” with the IRS.

Filing as a S corporation offers several benefits for small business owners:

Pass-through taxation: One of the biggest benefits of an S corporation is that it allows for "pass-through" taxation, meaning that the company's income is taxed only at the individual level and not at the corporate level. This can result in significant tax savings for the business owners.

Limitation of personal liability: S corporations offer limited liability protection, which means that the owners are generally not personally responsible for the company's debts or liabilities.

Flexibility in structuring ownership: S corporations can have multiple owners, which makes it easier to bring on partners or investors. Additionally, ownership can be structured in a way that allows for equal distribution of profits and decision-making power among the owners.

Access to certain tax benefits: S corporations may be eligible for certain tax benefits, such as deductions for health insurance and contributions to certain employee benefit plans.

Easier to transfer ownership: The ownership of an S corporation can be easily transferred, making it a good choice for businesses that may be sold in the future.

However, it's important to note that there are also some disadvantages to consider when deciding whether to file as an S corporation, such as restrictions on the types of shareholders that the company can have, and the requirement to comply with complex regulations. It's recommended to consult with a tax professional to determine whether S corporation status is the right choice for your business.

To discuss whether your business should elect to file as an S Corp, or to review your tax planning options, be sure to contact our office and find out how much money you could be saving!

Referral Corner

Every month we put the spotlight on another local business.

This month we're featuring:

Brandon Altenweg, with Discover Anoka

What do you do?

I’m the current Chair of Discover Anoka. We’re a group of 50 small businesses right in downtown Anoka. I also manage the Discover Anoka Facebook page. 

What is your specialty and who do you help?

Discover Anoka is all about promoting downtown Anoka and the businesses that makeup our membership. We make sure something is always happening in DTA. There’s something happening almost every month. Visit discoveranoka.com to see all that DTA has to offer. Downtown Anoka is thriving better than ever with antiques, boutiques, good eats, and sweet treats! 

What is the best way to reach you to get started?

Discover Anoka is an exclusive group and members must have a physical location somewhere between 1^st Ave to 5^th Ave and from Main to Jackson. We operate out of the Anoka Area Chamber of Commerce office.

What do you do when you're not working?

I work all the time but live a retired lifestyle. Looking forward to Twins baseball starting this spring.