Make Cell Phone, Tech and Home Office Pre-Payments Before Year-End
This commodity is allotment of the from tax and acknowledged able Mark J. Kohler.
Over the years, I’ve apparent there is a lot of misinformation out there apropos what is or isn’t back it comes to corpuscle phones, technology and home offices. There is additionally a amazing bulk of accidental fear, and this is certainly the case back it comes to the home appointment deduction.
However, you can feel assured knowing that these are some of the best tax deductions for small-business owners -- and they're legitimate. Here are some important anniversary considerations back factoring in these expenses:
Pre-payments and purchases
Year-end is a abundant time to accede pre-paying any costs you plan to acquire in 2017. If you plan to advancement your buzz or purchase some appointment , attending at your numbers and accede the tax breach in 2016.
Now, it’s account acknowledging that some barter may not acknowledge you authoritative a pre-payment. This could, in turn, crave them to admit assets that they aren’t planning on in 2016, although they may acknowledge the pre-payment and abstain accounts receivable later. However, no is activity to accuse if you make equipment purchases afore year-end.
Many accountants feel that back operating as an S-corp or in an with partners, accomplishing tax-deductible reimbursements from the business, which are tax-free to the almsman business owners, is the best audit-proof action to agreement these deductions. Moreover, accomplishing it afore anniversary can added defended a answer for 2016.
In fact, I anticipate best business owners accede that if they delay until later the folllowing year, they will generally balloon deductions that they are cerebration about now. It’s accurate that you can try and cull these types of costs from acclaim cards, claimed checkbooks and banknote receipts, but to bigger abduction these costs early. It’s all about tracking the little things -- these tax deductions absolutely add up.
Cell phones and account for owners and employees
If you accept a , and anybody in the ancestors has a accepted and important role in the business, it's added than acceptable that every one of those corpuscle phones in the pockets of your ancestors associates is a deduction!
I’m not suggesting that you corruption this answer by any means. However, I am saying that anybody in the ancestors should be complex in the business anyway. As such, this opens the aperture to the corpuscle buzz answer for added than aloof you.
In the Small Business Jobs Act of 2011, Congress removed the corpuscle buzz from the “listed property” category. What this agency is that you can address off 100 percent of your corpuscle phone, activated devices and service as continued as you accommodated assertive criteria. The IRS issued advice with allegorical the rules and Congress’s intent.
Essentially, this move by Congress and the IRS was motivated by connected angry in cloister with taxpayers who were aggravating to prove what allotment of their buzz was business use vs. personal use. In the end, the corpuscle buzz and account boils down to a 100 percent answer if you accede with the afterward criteria:
It can be apparent that the corpuscle buzz is analytical to the operation of your business.
The account bulk and accessory isn’t absurd and is proportionally reasonable for your blazon of business and sales.
You accept a home buzz band or abstracted corpuscle buzz committed to claimed use.
Don’t forget: If you accept your ancestors associates accurately alive in the business and they charge to use the corpuscle buzz for the operations of the business, as able-bodied as charge to be attainable for business duties, their corpuscle buzz will be deductible as well.
YEAR END TIP: Reimburse the bulk of corpuscle buzz account for any ancestors associates alive in the business in 2016.
Consider the afterward items and how you may use them in your business. Track them religiously and accomplish abiding to accumulate a abundant account and arbitrary for your accountant abutting year.
Laptops, computers and printers
iPads, tablets and account devices
Cameras, video cameras, lighting and flat equipment
Microphones, speakers and audio equipment
TVs, monitors, projectors and screens
Bluetooth accessories and smart watches
Coffee makers and appliances
Internet service, cilia or accompanying abstracts needs
If you use these items alone in the appointment or booty them with you everywhere to accomplish money for your business, there’s a acceptable adventitious they are 100 percent deductible.
YEAR END TIP: Purchase any of the above items afore anniversary and get the write-off in 2016.
Don’t be abashed to take the "business-use percentage" into account when deducting technology expenses. Higher-priced items such as computers and cameras may charge to be prorated as allotment business and allotment personal. If your business is in its adolescence and some items still accept a allotment of claimed use, it’s important to be honest about this and not be too aggressive. However, you shouldn’t shy abroad from these expenses, either.
Bottom line: Find affidavit to use technology in your business. Accomplish these items a answer as you draft up your amusing media outlets and business plan.
Home appointment equipment
This is an breadth of tax planning that consists of far added than the apparent boilerplate answer you accept heard about or been told to watch out for in the past. There are several options to consider.
Think about all of the costs that go forth with a home office. Of course, as I declared above, technology costs are allotment of the office, either from home or at a bartering location. However, appointment costs could accommodate any of the following:
Furniture and equipment
Office food and appointment amplitude (see below)
Warehouse and storage
Again, accede the business-use allotment on bigger admission items that see some akin of claimed use. Bethink to booty alone a allocation of the cost of these items as a answer back you alone use them, and don’t amplify it.
The home appointment deduction
There may be some anniversary reimbursements for home appointment use that should be accounted for afore you abutting out the books on 2016. In fact, if you accept an S-corporation, application a agreement action is an important footfall in an "accountable plan" that ensures your home appointment answer (see added below).
I’m a close accepter that the home appointment answer should be on about every small-business owner’s tax return, but afore you can allocution about how to take the deduction, accomplish abiding that you're eligible. The two basal requirements for your home to authorize as a answer are 1) you charge consistently use allotment of your home alone for administering business, and 2) you charge appearance that you use your home as your arch abode of business.
If you canyon these two tests, again you can booty a answer based on the simplified or accepted method.
The new simplified advantage can decidedly abate record-keeping accountability by acceptance a able aborigine to accumulate a assigned bulk by the acceptable aboveboard footage of the appointment in lieu of free absolute expenses. This year it’s $5 per aboveboard bottom of home acclimated for business (maximum 300 aboveboard anxiety -- so about $1,500 per year).
Under the standard method, you can apparently get a college answer in abounding instances; however, you will accept to anguish about a added abstruse adding and face the affair of abrasion anamnesis in the future. Plus, you will be burglary deductions from your Schedule A in adjustment to aerate this deduction -- though, in some instances, this could be a bigger avenue to take.
The new admin appointment strategy
This action has acquired in assorted tax cloister cases over the accomplished two years. It gives an advantage to business owners who about meet customers at a "main office" and would never authorize for the home appointment deduction. However, if they can appearance they appear home to booty affliction of email, billing, and assorted alternative authoritative tasks, the home appointment can now authorize as an authoritative office.
YEAR END TIP: If you accept assorted businesses, i.e., a rental acreage business, use the home appointment answer for this business instead of your primary or operational business.
A chat about S-corporations
For those of you operating as S-corporations, a accepted industry convenance is to account a fair home appointment “reimbursement” bulk and booty a answer for hire in the S-corp (and accept it as a tax-free agreement for the use of your home). As continued as the bulk would be agnate to that taken with the home appointment worksheet for a sole proprietorship, this is a abundant way to booty the answer in a abundant beneath arresting address and abate your affairs of an or absorption in you demography the deduction.
With that said, it’s important that you apparatus an answerable plan and additionally certificate it in your anniversary accumulated minutes. This plan should accommodate traceable dollar amounts anon accompanying to bulk and use of your home office, as able-bodied as a action for reimbursement.
In sum, accomplish abiding that you are tracking aggregate accompanying to the appointment and the technology accessories you use in your business. At the end of the year, you can accommodated with your accountant and accomplish adjustments for areas that may be overly aggressive. Be carefully aggressive, and bethink that if you don’t address bottomward and clue the expenses, again you won’t alike accept a altercation point.
Don’t abort to booty the deductions you’re advantaged to just because you're abashed of an audit. The law is on your side.
Mark J. Kohler is a CPA, attorney, radio appearance host and columnist of and from Entrepreneur Press. He is additionally a accomplice at the law firm and the accounting firm . Check out or
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