Small business tax help website

Tax Guide Business Deductions

Below is a tax guide for business deductions. It is important that you read and understand the tax guide for business deductions before filing your business tax returns. Tax laws can be complicated and there are many rules for business deductions that you must follow correctly.

Businesses pay taxes on net profit (after business deductions), not gross income

First of all, the IRS recognizes that businesses no matter how small incur expenses. Unlike employees, business owners pay taxes on not gross income but net income after all deductible business expenses are deducted. The more business deductions you claim the less taxes your business owes the IRS.

Business deductions must be justified

Not all business deductions are allowed by the IRS. Business deductions that are allowed must be justified and you must be able to provide proofs of the business expenses if ever audited by the IRS. IF a business owners is found to deduct more than the actual business expenses or deduct expenses that are not allowed by the IRS, then if he or she is ever audited by the IRS, the IRS may charge back taxes as well as penalties. Therefore, it is important to learn about what business deductions are allowed and what not and be familiar with the IRS tax guide for business deductions.

Legitimate businesses can claim business deductions

You must be considered by the tax laws as being in business in order to claim any business deductions from the IRS. Just because you think you have a business doesn't mean the IRS will agree. It is more tricky than most people think to justify to the IRS that you are in business for something if you cannot show proofs that you make money with the business but you want to always take business deductions year after year.

Can I claim business deductions if I don't make money with my business?

While you can claim all kinds of business deductions even if your business does not make any money at all. For example, you start up a business but never sold a single item, you can claim a lot of business deductions because you did try to sell something and you can prove to the IRS that you actually set up a store and so on. However, if you never try to sell or you cannot prove that you try hard to sell your inventory, then the IRS may think that you are engaging in this activity as a hobby rather than a business. That would explain why you never made any money. So, be careful when claiming business tax deductions. Make sure you are familiar with the IRS tax guide for business deductions.