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November 10, 2016

Hot Topics with Smith Tax & Bookkeeping

Taunya Smith


    It’s hard to believe 2016 is almost over!  We have 46 days until Christmas and 160 days until the tax deadline, which is April 17, 2017.
    The tax season for paper and electronically filed returns will open on January 19, 2017, so don’t wait until the last minute to start getting your paper work in order.
    Many business owners have concerns about what they can and cannot claim as expenses for their business from year to year, so I will address some of those common concerns as we approach tax season in the weeks to come.
    2016 Mileage Rates
    The IRS as of December 2015, announced the 2016 mileage rates that can be used to calculate deductible cost to operate an automobile for business, charity, moving and medical expenses.
    As of January 1, 2016, the standard mileage rate for car, which also includes vans, pickups or panel trucks are:
  • 54 cents per mile for business miles driven
  • 19 cents per mile driven for medical or moving
  • 14 cents per mile driven for service of a charitable organization
    • You are allowed the option of calculating actual cost of using your vehicle rather than using the standard rates, but keep in mind you cannot use if you use any depreciation method under MACRS (Modified Accelerated Cost Recovery System) or the 179 deduction; nor can you use standard mileage rate for more than four vehicles that are used simultaneously.
      Deductions for Professionals
      If you started your business in 2016 as a self-employed professional in the course of your work the following expenses are allowed as deductions from income when figuring profit from your practice on the Schedule C:
  • Dues to professional societies
  • Operating expenses and repairs of car used on professional calls.
  • Supplies
  • Subscriptions to professional journals
  • Rent for office space
  • Cost of fuel, light, water, and telephone used in the office
  • Salaries of assistants
  • Malpractice insurance
  • Cost of books, information services, professional instruments, and equipment with a useful life of one year or less. Professional libraries are depreciable if their value decreases with time.
  • Fees paid to a tax preparer for preparing Schedule C and related business forms.
    • Many self-employed people look at daily lunches with an associate as an expense, but the tax courts agreed with the IRS that professionals do not need to have lunch together daily just to discuss business therefore the meals are not deductible.
      Home Office Deduction
  • If you operate your business from home using a room or other room as an area to assemble or prepare items for sale, you are able to deduct expenses such as utilities, insurance, repairs and depreciation allocated to your business use of the area. These expenses are a single write off referred to as a “home office deduction.” There are two ways to figure the deduction using your actual expenses or relying on the IRS set standard amount. Exclusive and regular use – to use the home office deduction you must prove that you use the home exclusively and on a regular basis either as:
  • A place of business to meet or deal with patients, clients or customers in the normal course of your business.
  • Your principal place of business which means your home office will qualify as your principal place of business if you spend most your working time there and most of your business income is attributable to your activities there.
    • I do hope these topics help answer questions that you have regarding your taxes as a self-employed professional and I will cover more in the weeks to come.
      Owner of Smith Tax & Bookkeeping Services, Taunya Smith is a bookkeeper and tax preparer. For more information, you can follow Smith on Facebook, email her, or visit her website at www.smithtaxprep.com.

    One Comment

    1. Sandra Provis November 23, 2016 at 6:29 pm · Reply

      Thank you so much for all these details. There was some I didn’t know about.

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