Law Offices of Connie Yi, PC
Tell Us About Your Case
888-312-6978
View Our Practice Areas

A basic understanding of business expense deductions: Part I

If you own a business or are trying to start one, you have probably realized the legal regulations that business owners must abide by are often complex and confusing. Tax compliance alone is complicated enough to make you rethink your decision to be an entrepreneur.

We certainly can't cover all relevant tax issues in this blog. But in this week's posts, we'll talk about one tax issue that has landed many small business owners in trouble: deducting business expenses. If done correctly, business deductions can save you a lot of money. If done incorrectly or dishonestly, some business deductions can actually lead to criminal charges.

One of the biggest issues people face is deciding what qualifies as a business expense. What about expenses that could also be considered personal?

On its website, the IRS notes that an expense must be both ordinary and necessary in order to be considered a deductible business expense. Here is how the IRS defines those two terms:

Ordinary: An expense "that is common and accepted in your trade or business"

Necessary: An expense "that is helpful and appropriate for your trade or business" (but it doesn't have to be indispensable)

Some business owners get charged with tax fraud for erroneously classifying personal expenses as business expenses. While the misuse of deductions is often intentional (meaning the business owners intended to commit fraud), that's not always the case. These IRS definitions still leave some room for interpretation. That's why it's a good idea to bring specific questions about your business to a hired professional with an intimate knowledge of tax law.

Please check back later this week as we continue our discussion about business expense deductions.

No Comments

Leave a comment
Comment Information

Contact Us

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Email Us For A Response

Office Locations

Law Offices of Connie Yi, PC
323 Ray Street
Pleasanton, CA 94566

Phone: 925-484-0888
Pleasanton Law Office Map

San Mateo
1900 S. Norfolk Street, Suite 350
San Mateo, CA 94403

Phone: 415-433-3350
Map & Directions

San Francisco
490 Post Street, Suite 508
San Francisco, CA 94102

Toll Free: 888-312-6978
Phone: 415-433-3350
San Francisco Law Office

Sunnyvale
1250 Oakmead Pkwy, Suite 210
Sunnyvale, CA 94085

Toll Free: 888-312-6978
Map & Directions