CPA Blog

Documentation is the key to business expense deductions

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Published: Tuesday, 13 September 2016 09:51

Written by Phillip Strickler, CPA.CITP

If you have incomplete or missing records and get audited by the IRS, your business will likely lose out on valuable deductions. Here are two recent U.S. Tax Court cases that help illustrate the rules for documenting deductions.

Case 1: Insufficient records

In the first case, the court found that a taxpayer with a consulting business provided no proof to substantiate more than $52,000 in advertising expenses and $12,000 in travel expenses for the two years in question.

The business owner said the travel expenses were incurred ”caring for his business.“ That isn’t enough. ”The taxpayer bears the burden of proving that claimed business expenses were actually incurred and were ordinary and necessary,“ the court stated. In addition, businesses must keep and produce ”records sufficient to enable the IRS to determine the correct tax liability.“ (TC Memo 2016-158)

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Now’s the time to start thinking about “bunching” — miscellaneous itemized deductions, that is

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Published: Tuesday, 06 September 2016 08:59

Written by Phillip Strickler, CPA.CITP

Many expenses that may qualify as miscellaneous itemized deductions are deductible only to the extent they exceed, in aggregate, 2% of your adjusted gross income (AGI). Bunching these expenses into a single year may allow you to exceed this “floor.” So now is a good time to add up your potential deductions to date to see if bunching is a smart strategy for you this year.

Should you bunch into 2016?

If your miscellaneous itemized deductions are getting close to — or they already exceed — the 2% floor, consider incurring and paying additional expenses by Dec. 31, such as:

• Deductible investment expenses, including advisory fees, custodial fees and publications
• Professional fees, such as tax planning and preparation, accounting, and certain legal fees
• Unreimbursed employee business expenses, including vehicle costs, travel, and allowable meals and entertainment.

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Speed up business decisions with dashboard reports

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Published: Tuesday, 06 September 2016 08:29

Written by Phillip Strickler, CPA.CITP

Would you drive a car without a functional dashboard? Perhaps once a month someone could tell you how fast you were going and how much fuel you had left. Sound good? Probably not. Yet this is how many business owners run their companies.

The good news is there’s a solution. With the right software and some help from our firm, you can regularly receive dashboard reports that provide a one- or two-page summary of key business performance metrics in a concise, visual format.

Good looking info

Similar to a car’s control panel, dashboard reports provide business owners and managers with timely, relevant input to make quick but informed decisions. Everything in a dashboard report can typically be found elsewhere in the company’s financial reporting systems, just in a less user-friendly format.

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An effective succession plan calls for decisive action

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Published: Tuesday, 30 August 2016 08:36

Written by Phillip Strickler, CPA.CITP

The prospect of leaving your company in the hands of someone else likely brings mixed emotions. You’ve no doubt spent a substantial amount of time and a great degree of effort in getting your enterprise to where it is today. So, as the saying goes, parting will be such sweet sorrow.

Yet, when it comes to creating and executing a succession plan, decisive action is critical. You’ve got to respect the importance of timeliness — not only for you and your family, but also for your successor and employees. So here are two key questions to answer.

1. When’s your target date?

By designating your departure date far enough in advance, you’re more likely to pick the right successor, as well as facilitate a smoother transfer of power.

In some industries, it can take years to appoint and train a qualified successor and effectively work through the many management, ownership and organizational issues. But don’t choose a date too far away, because your successor-to-be may get tired of waiting.

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