The Key 27 Words Describing What You Can Deduct
BUSINESS OWNERS PAY CLOSE ATTENTION TO THE FOLLOWING KEY TWENTY-SEVEN (27) WORDS DESCRIBING WHAT YOU CAN DEDUCT FOR YOUR BUSINESS AND EMPLOYEE BUSINESS EXPENSES:
The 27 words are found at the start of the Internal Revenue Code Section 162. Trade or business expenses.
(2) In general
“There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business…..”
Note: The key words are: “Ordinary and Necessary”
An ordinary expense is one that is common and accepted in the taxpayer’s field of business, trade, or profession.
A necessary expense is one that is helpful and appropriate to the taxpayer’s business.
However expenses are not deductible to the extent they are lavish or extravagant.
Remember this: Everything you do, everywhere you go, and everyone you meet can be related to your business.
You can’t afford to ignore my advice if you have a small business.
You can’t afford to ignore this advice if you own a small business
For the last 28 years I have worked with small businesses to reduce their taxes and prepare their tax returns. In other words I do tax planning and tax preparation for a living. My clients are one person businesses, mom and pop businesses, full time businesses, part-time businesses, home based businesses, and businesses with many employees and multiple locations. They are the very fabric of today’s economic society.
But regardless the size or type of business that you operate, if you do not understand another word I say, understand this: “It is not what you earn that matters, it is what you get to keep that counts!!!”
In pursuing the dream of lower taxes, it is never necessary to resort to tax cheating, risky loopholes, or even to question the legality of the tax system. There is a big difference between cheating, risky loopholes, and tax reduction strategies.
Tax cheating is understating your income or claiming tax deductions for assets that you don’t own or expenditures that you never made.
Risky loopholes, on the other hand, are gray, mostly untested areas of the tax law that allow you to claim “default deductions” that Congress and the IRS probably would have ruled against had they had the foresight to see the possibilities. Since a specific “no” does not exist, you create a loophole by saying, “yes” to a perhaps a risky deduction.
On the other hand, there are hundreds of government mandated legal tax reduction strategies and deductions. I will teach you many of those legal tax reduction strategies and deductions that you can implement immediately.
Owning a operating your own business is what I call the “last of the great American tax shelters”. There are hundreds of government mandated legal tax reduction strategies.
The question of legality and morality of tax deductions was settled once and for all over 40 years ago by the United States Court of Appeals in an opinion written by Judge Learned Hand.
“Anyone may so arrange his affairs that his taxes shall be low as possible. He is not bound to choose a pattern that will best pay the treasury. No one owes any public duty to pay more than the law demands.”
This decision should govern both your tax plan and your tax attitude.
Rearranging and designing your affairs to create tax deductions where you had none before is the one of the big keys to paying less taxes, legally, ethically and morally.
Think about this, most people spend all they earn anyway, so why not spend the money in a legal, ethical and moral fashion in order to obtain a tax deduction. “Everything is cheaper when you get to deduct it.”
“It is not what you earn that matters, it is what you get to keep that counts!”
Please note: There is not “one” big tax deduction in the sky that will reduce your taxes like you want; it is through the use of combinations of tax strategies that taxes are reduced.