Author Topic: Business Write offs / CPAs / 1800Accountant  (Read 5735 times)

LovinPSDs

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Business Write offs / CPAs / 1800Accountant
« on: September 16, 2019, 06:48:33 PM »
So I filed for an LLC through LegalZoom.  All that has gone well, but I guess one of the follow on items is they set you up on a "consultation" call with someone from 1800Accountants.  It was a pretty solid sales pitch about hit 10's of thousands of business expenses that normal CPAs will miss and claiming a pretty dramatic loss on the business for the first year or two in attempts to drop my overall taxable income.  I get the idea... so my questions.

1. Is there really some mystery formula for running a small consulting LLC out of my home that could save me that much on taxable income?  Seems "too good to be true" for a small side biz.

2. based on answers to #1, what do I need to be talking to my CPA about, or should I consider this accounting group.  They had a pretty heafty price tag for someone like me, moonlighting a few jobs here and there.


SeattleCPA

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #1 on: September 17, 2019, 07:23:32 AM »
The basic rule for deducting expenses is Internal Revenue Code Section 162. It says anything that's ordinary and necessary is deductible.

If someone can't figure out how to apply that, often you can think about expenses an employer would reimburse an employee for. If an employer would reimburse you, it's deductible.

Special rules apply to spending categories where taxpayers have been habitually bad: travel, vehicles, etc. But you can look this stuff up on the web.

I bristle at the suggestion that "normal" CPAs miss deductions. I don't think that's true.

Two things that IMHO are true? Many taxpayers don't maintain good accounting systems (which costs them tons of deductions). And most folks can keep their taxes simple enough to DIY.

P.S. The three BIG tax deductions or loopholes available to small businesses: a pension plan (which you can get plenty of info and advice about here), the S corporation thing (described here: The Million Dollar S Corporation Mistake), and then the Section 199A deduction (described and discussed here: Section 199A: Tax Break of Century).

CareCPA

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #2 on: September 17, 2019, 08:37:49 PM »
There are also some rather aggressive strategies that some CPAs employ, and I think they mostly just hope you don't get audited.

For example, the Augusta rule says you can rent your house out for fewer than 15 days without reporting rental income. So as a business, maybe you rent your own home for a week, twice a year, for "management and board meetings."
The Holiday Inn down the street charges $1,000 a day for a conference room. You decide that's comparable, so you pay yourself $1,000 a day from your business to rent your own house. Now you've created a $14,000 expense on the business (rent expense) that doesn't need to be reported as income to you personally.

Will it hold up under audit or in court? It depends - how much are you willing to pay a lawyer to defend a $14k deduction?

DadJokes

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #3 on: September 18, 2019, 06:00:23 AM »
...

Will it hold up under audit or in court? It depends - how much are you willing to pay a lawyer to defend a $14k deduction?

$13,999

Cpa Cat

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #4 on: September 18, 2019, 06:27:10 AM »
...

Will it hold up under audit or in court? It depends - how much are you willing to pay a lawyer to defend a $14k deduction?

$13,999

Probably not the best decision. The tax benefit of a $14,000 deduction is far less than $14,000.


Anyway - I'm with SeattleCPA. Few CPAs are truly "missing" deductions. Some are being lazy, or are overwhelmed and will only take what you give them without making suggestions (this is your typical H&R Block return - they're trying to get your return done right there in the office, so they don't have the inclination to send you hunting for missing info, even if their 6 week training covered it). Others are a very conservative (probably too conservative) and are unwilling to discuss any grey area. Others are actually missing things because they're not intellectually curious enough to look for creative deductions.

A start up business will often have a loss in the first year because it doesn't have a regular income stream and it has start up expenses. But a lot of service based businesses will profit in their first year because overhead is low. But there's no magic formula - your accountant can't magic up tax deductions (well... I mean... there was a local joint I heard of called Mo Money Taxes and they supposedly did magic up deductions).

I defended a couple of audits from another tax firm who had lost their CPA. They actually used CareCPA's example of the Augusta rule liberally. We successfully defended it once, because the client really did host events in their home and had flyers to prove it and had actually paid the rent. We lost it another time because the client didn't observe the formalities of writing the check and couldn't prove meetings had taken place when the "board" was only the husband and wife.  Although the rate of audits should probably be a hint - I think we had 4 audits in the single year and they only had around 80 total clients. If someone at the IRS had been smart enough to make that connection, all 80 should have been audited. But the rental of the home wasn't the only "aggressive" strategy happening on those returns.
« Last Edit: September 18, 2019, 06:30:38 AM by Cpa Cat »

LovinPSDs

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #5 on: September 18, 2019, 06:34:02 AM »
Thank you for the feedback.  I think what I'm really looking for is a CPA who wants to make suggestions, and is helping me push opportunity, not sitting back waiting for my paperwork.  Surely I can understand why someone would want to be that latter.  Perhaps I need a CPA I can grab a beer with and openly discuss these things, rather than my current guy who seems good at what he does but isn't to social/not my age/someone I talk to maybe 2 times a year.

Anyway, I'm going to stay clear of 1800Accountants and start thinking about my next move...

DadJokes

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #6 on: September 18, 2019, 06:35:37 AM »
...

Will it hold up under audit or in court? It depends - how much are you willing to pay a lawyer to defend a $14k deduction?

$13,999

Probably not the best decision. The tax benefit of a $14,000 deduction is far less than $14,000.

Well, since we're taking that seriously, I guess $1,679 if I'm in the 12% bracket or $3,079 in the 22% bracket.

Anyway, I'm in agreement with both of you. I may only be an auditor, but it's pretty obvious what is and isn't allowable. The important thing would be proper planning, which I wouldn't expect to get from some 1-800 company.

CareCPA

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #7 on: September 18, 2019, 06:55:17 AM »
[...]
We lost it another time because the client didn't observe the formalities of writing the check and couldn't prove meetings had taken place when the "board" was only the husband and wife.  Although the rate of audits should probably be a hint - I think we had 4 audits in the single year and they only had around 80 total clients. If someone at the IRS had been smart enough to make that connection, all 80 should have been audited. But the rental of the home wasn't the only "aggressive" strategy happening on those returns.
This was the direction I was headed. I see it used where it's a one-owner/one-employee company, renting their own home, for annual meetings. I would imagine that's difficult to defend...

SeattleCPA

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #8 on: September 18, 2019, 08:56:11 AM »
Few CPAs are truly "missing" deductions. Some are being lazy, or are overwhelmed and will only take what you give them without making suggestions (this is your typical H&R Block return - they're trying to get your return done right there in the office, so they don't have the inclination to send you hunting for missing info, even if their 6 week training covered it).

I would doubt "tax accountants" at H&R Block, Liberty or Jackson Hewitt are CPAs. Most are seasonal workers making $12 or $14 an hour, aren't they? After ten weeks of training?



I defended a couple of audits from another tax firm who had lost their CPA. They actually used CareCPA's example of the Augusta rule liberally. We successfully defended it once, because the client really did host events in their home and had flyers to prove it and had actually paid the rent.


Here's a longer discussion of the Section 280A rule, which is what we're talking about when we reference "Augusta":

https://evergreensmallbusiness.com/vacation-homes-as-small-business-tax-shelters/

I think it probably works if you understand the law and regulations thoroughly. But gosh it would be easy to screw up...


SeattleCPA

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #9 on: September 18, 2019, 09:06:18 AM »
Perhaps I need a CPA I can grab a beer with and openly discuss these things, rather than my current guy who seems good at what he does but isn't to social/not my age/someone I talk to maybe 2 times a year.

I'm sorry, but I need to defend your current CPA here. Think about how your suggestion scales.

So your CPA hopefully has at least 100 clients and maybe 200 or 300 clients he or she charges what you pay. (Just do the math to figure out how many clients they need to produce some revenue number that'll let them pay half as business expenses and then live on the other half as their income.)

Example: 200 clients times $500 a year equals $100,000 - 50% for expenses so the person makes $50K?

And you want them to, in addition to doing your tax return, to have a beer with you? So scale that to all 100 clients or 200 clients so they all get that service? Your CPA will be out drinking with clients every weekend of the year!

This observation, which I think is important: professional services are expensive if the person is good and gives a client much time. And most taxpayers and even most small businesses can't economically justify paying a good CPA what she or he needs to charge to deliver the service.

Restated another way, clients can want a Cadillac experience but only have the budget for a scooter.


LovinPSDs

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #10 on: September 18, 2019, 09:42:54 AM »
SeattleCPA

I think your right... I'm word vomiting my way through a topic I don't really understand so your feedback is helpful and likely steering my the right direction.  A scheduled (and paid) consultation with my current CPA would be more fruitful than anything that's come across my mind thus far. 

I appreciate the Face Punch!

Cpa Cat

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #11 on: September 18, 2019, 01:01:35 PM »
And you want them to, in addition to doing your tax return, to have a beer with you? So scale that to all 100 clients or 200 clients so they all get that service? Your CPA will be out drinking with clients every weekend of the year!

I'd be drunk most days.

That said, I did work at a firm where a large percentage of the accountants on staff were drunk most days of busy season. But they were mostly drinking alone at their desks, or while crying in the bathroom.

Kronsey

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #12 on: September 18, 2019, 02:41:52 PM »
Restated another way, clients can want a Cadillac experience but only have the budget for a scooter.

When I was earlyish in my career, I used to think I could help out these types of people. And that the prior accountant/CPA/advisor just didn't "care" to provide the services that SMBs wanted.

I soon realized exactly what SeattleCPA is saying was true and how wrong I was.

Most of these people either expect their professional advisors to make $20K/year, or they think they are a special snowflake who deserves extra service, attention, and help just because (and never want to pay for it either).

If you want extra hand holding from your professionals, it is going to cost you a lot more money. And if it doesn't, then you probably don't want to work with that professional in the first place!


SeattleCPA

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #13 on: September 18, 2019, 07:36:03 PM »
SeattleCPA

I think your right... I'm word vomiting my way through a topic I don't really understand so your feedback is helpful and likely steering my the right direction.  A scheduled (and paid) consultation with my current CPA would be more fruitful than anything that's come across my mind thus far. 

I appreciate the Face Punch!

OK first I don't want to be face punching anybody. Sorry. Perhaps I'm overly sensitive to issue? ("Hump? What hump?")

Also FYI I think your idea of getting an hour consultation is great. Call your guy after Oct 15. Tell him or her you want to buy an hour of consulting. Then when you have meeting, ask him or her to brainstorm with you about any options you have.

Hopefully your $200 investment returns, $1K or $2K in value.

If you don't get that sort of return on investment, maybe you truly don't have options. (W-2 folk often don't have much they can do other than stuff like IRAs, 401(k)s, HSAs and all the other alphabet solutions.)

Also it's possible you're working with someone who just can't think in terms of optimizing your taxes. And maybe in that case, you conclude it's time to move to some CPA who will help you optimize.

P.S. Again, apologies if what I did felt like me punching you. Ugh.

SeattleCPA

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #14 on: September 18, 2019, 07:37:41 PM »
And you want them to, in addition to doing your tax return, to have a beer with you? So scale that to all 100 clients or 200 clients so they all get that service? Your CPA will be out drinking with clients every weekend of the year!

I'd be drunk most days.

That said, I did work at a firm where a large percentage of the accountants on staff were drunk most days of busy season. But they were mostly drinking alone at their desks, or while crying in the bathroom.

OK, I hope you're joking. I'm laughing here... but fingers crossed on my part that you're joking...

SeattleCPA

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #15 on: September 18, 2019, 07:38:15 PM »
Restated another way, clients can want a Cadillac experience but only have the budget for a scooter.

When I was earlyish in my career, I used to think I could help out these types of people. And that the prior accountant/CPA/advisor just didn't "care" to provide the services that SMBs wanted.

I soon realized exactly what SeattleCPA is saying was true and how wrong I was.

Most of these people either expect their professional advisors to make $20K/year, or they think they are a special snowflake who deserves extra service, attention, and help just because (and never want to pay for it either).

If you want extra hand holding from your professionals, it is going to cost you a lot more money. And if it doesn't, then you probably don't want to work with that professional in the first place!

+1

LovinPSDs

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #16 on: September 19, 2019, 05:04:21 AM »
SeattleCPA

I think your right... I'm word vomiting my way through a topic I don't really understand so your feedback is helpful and likely steering my the right direction.  A scheduled (and paid) consultation with my current CPA would be more fruitful than anything that's come across my mind thus far. 

I appreciate the Face Punch!


P.S. Again, apologies if what I did felt like me punching you. Ugh.

I welcome it!  Honestly! That's why we're here right? To bounce ideas off eachother... help eachother grow. 

Kris

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #17 on: September 21, 2019, 04:01:03 PM »
I'm not a CPA, but I do have an LLC, taxed as an S-Corp. Though mine is a full-time business, making a good income. And I've been where the OP is/was at the start of this thread.

Yeah, there are definitely a bunch of operations out there that will pitch you this exact same line: they can find "thousands" of deductions for you that most CPAs "don't know about" or something like that. And they'll find them all for you, for a pretty hefty price.

When you ask them to elaborate, they ALL haul out the Augusta Rule as their master stroke. Because it sounds amazing, right? And then they'll give you a couple of other examples, less impressive but still sorta impressive.

But yeah, I, like you, am a one-person operation. And those outfits are hoping that people like us will fork over money to them for their services. it's how they make money, right?

But there are tons of legit write-offs that we already get, that "normal" CPAs tell you about, that are perfectly legit and don't require paying a special firm thousands of dollars to "find" for you. And you won't be sweating bullets if and when you get audited.

Just offering my total layperson-but-experienced-one-person-business-owner take.

SeattleCPA

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #18 on: September 25, 2019, 07:58:22 AM »
When you ask them to elaborate, they ALL haul out the Augusta Rule as their master stroke.

You know what's weird to me about this? I've never heard this called the August rule. I have only heard it referred to by the actual IRC section, Section 280A. Or by the "formula" which is the "14 day rental" rule which appears in Section 280A(d).

I would actually be suspicious of any tax practitioner who refers to this as the "Augusta rule." Why would you not reference the actual law (so someone could look it up) or more usefully use the actual "formula"?

... And you won't be sweating bullets if and when you get audited.

This is off-topic but probably sort of relevant. For the record, taxpayers IMHO usually lose audits because their record keeping is atrocious. Not because they take deductions they're not entitled to.

Kris

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #19 on: September 25, 2019, 12:51:30 PM »
When you ask them to elaborate, they ALL haul out the Augusta Rule as their master stroke.

You know what's weird to me about this? I've never heard this called the August rule. I have only heard it referred to by the actual IRC section, Section 280A. Or by the "formula" which is the "14 day rental" rule which appears in Section 280A(d).

I would actually be suspicious of any tax practitioner who refers to this as the "Augusta rule." Why would you not reference the actual law (so someone could look it up) or more usefully use the actual "formula"?


Good question. Maybe because when they're talking to laypeople, "Augusta rule" is easier to understand and remember?

BicycleB

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #20 on: October 16, 2019, 06:58:27 PM »
I'd be leery of people who claim to be finding thousands of dollars of deductions that other accountants miss. Also, the 1-800-Accountants sounds fishy to me. For CPAs, my state has rules about firm names that that name doesn't seem to conform to. So in my state, I'd suspect that a company with that name may not be providing good quality services.

Fwiw, I think the key steps are tax planning and setting up your accounting system. As others have said, tax planning is something you do ahead of time, not at tax time. Similarly if you get your accounting set up well at the start, tax time is automatically pretty easy.

If you're consulting someone, maybe have them run through the categories of expense and deduction that will be relevant, and set up your bookkeeping to record those from the start. Or to save money, maybe just buy a tax software subscription, run through a mock filing with fake numbers, and note all the "questions" - data categories - it asks for. If you ran your example correctly, you should then have all the categories (account names) you want to use when recording and documenting your business expenses and income. Maybe a cost-effective way would be to set up your books accordingly, then have a real CPA check to see if your setup looks accurate.

Will defer to any comments by active pros in the field, or other knowledgeable parties.

SeattleCPA

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #21 on: October 17, 2019, 10:38:24 AM »

Fwiw, I think the key steps are tax planning and setting up your accounting system. As others have said, tax planning is something you do ahead of time, not at tax time. Similarly if you get your accounting set up well at the start, tax time is automatically pretty easy.


+1

And just to do a mini-rant... The above advice from BicycleB about setting up your accounting system is really, really, really, really good and actionable. Not having the discipline to use (correctly) a real accounting system is a bad mistake. You get more deductions if you have a real accounting system.

BTW, also, the reason someone loses an audit, usually, is they don't use run a real accounting system...

Missy B

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #22 on: October 20, 2019, 12:38:54 PM »
I'd be leery of people who claim to be finding thousands of dollars of deductions that other accountants miss. Also, the 1-800-Accountants sounds fishy to me. For CPAs, my state has rules about firm names that that name doesn't seem to conform to. So in my state, I'd suspect that a company with that name may not be providing good quality services.

Being Canadian I don't know anything about Augusta, but we have weasely types up here too. As soon as I hear anything about people claiming big deductions that other accountants miss I assume they are dishonest. Really, the only way to do that kind of thing is by bending the rules or outright breaking them. And 1-800-Accountants probably has 2 CPA's on staff at best, crooked ones who probably own part of the business. They've come up with strategies, and everybody else is just an accountant who they trained to employ sketchy exemptions. In fact, I would not be surprised if the people who are actually doing your taxes are in India.


SnipTheDog

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #23 on: October 20, 2019, 06:19:44 PM »
...

Will it hold up under audit or in court? It depends - how much are you willing to pay a lawyer to defend a $14k deduction?

$13,999

As a sole proprietor, can I have a tax deductible board meeting somewhere out of state?

cchrissyy

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #24 on: October 20, 2019, 07:01:08 PM »
I think you just need to become aware of what sorts of things are deductible and what sorts of records are required. Maybe your city library has this book
https://store.nolo.com/products/deduct-it-dedu.html

SeattleCPA

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #25 on: October 21, 2019, 07:45:52 AM »
...

Will it hold up under audit or in court? It depends - how much are you willing to pay a lawyer to defend a $14k deduction?

$13,999

As a sole proprietor, can I have a tax deductible board meeting somewhere out of state?

First, you don't have a board of directors if you're a sole proprietorship. So that's a problem.

Second, the real question is whether you meet the requirements for deducting travel expenses which is basically ordinary and necessary expense (so not extravagant) for your business incurred while away from home. To fully deduct trip, it needs to be primarily business. You probably want to read and absorb info here https://www.irs.gov/taxtopics/tc511 ) and maybe even the often-quoted court decision on this topic here... https://supreme.justia.com/cases/federal/us/326/465/ ) FWIW, I would doubt one could make a board meeting deductible. (What would be the purpose of traveling somewhere else?)

Third, keep in mind that you probably have other ways to make a travel expense deductible: I.e. go to an industry conference or to a relevant continuing education seminar.

Fourth, with travel expenses you don't get the deduction unless you can document a bunch of stuff. See this discussion: https://www.irs.gov/publications/p463#en_US_2018_publink100034069


CareCPA

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #26 on: October 21, 2019, 08:36:29 AM »
...

Will it hold up under audit or in court? It depends - how much are you willing to pay a lawyer to defend a $14k deduction?

$13,999

As a sole proprietor, can I have a tax deductible board meeting somewhere out of state?

First, you don't have a board of directors if you're a sole proprietorship. So that's a problem.

Second, the real question is whether you meet the requirements for deducting travel expenses which is basically ordinary and necessary expense (so not extravagant) for your business incurred while away from home. To fully deduct trip, it needs to be primarily business. You probably want to read and absorb info here https://www.irs.gov/taxtopics/tc511 ) and maybe even the often-quoted court decision on this topic here... https://supreme.justia.com/cases/federal/us/326/465/ ) FWIW, I would doubt one could make a board meeting deductible. (What would be the purpose of traveling somewhere else?)

Third, keep in mind that you probably have other ways to make a travel expense deductible: I.e. go to an industry conference or to a relevant continuing education seminar.

Fourth, with travel expenses you don't get the deduction unless you can document a bunch of stuff. See this discussion: https://www.irs.gov/publications/p463#en_US_2018_publink100034069
I think there's a logical argument for having an off-site meeting, even if there isn't an IRS acceptable reason.

For example, when I try to talk to my wife about business planning, vision, growth strategies, etc - it doesn't work at home. We get distracted by all the other stuff going on and all the cleaning/house projects/baby crying.
So we take a weekend trip every now and then to get to a neutral environment where we can discuss the important stuff. I can make the logical argument that it's necessary, but would I be able to convince an IRS auditor?

SeattleCPA

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #27 on: October 21, 2019, 05:25:56 PM »
...

Will it hold up under audit or in court? It depends - how much are you willing to pay a lawyer to defend a $14k deduction?

$13,999

As a sole proprietor, can I have a tax deductible board meeting somewhere out of state?

First, you don't have a board of directors if you're a sole proprietorship. So that's a problem.

Second, the real question is whether you meet the requirements for deducting travel expenses which is basically ordinary and necessary expense (so not extravagant) for your business incurred while away from home. To fully deduct trip, it needs to be primarily business. You probably want to read and absorb info here https://www.irs.gov/taxtopics/tc511 ) and maybe even the often-quoted court decision on this topic here... https://supreme.justia.com/cases/federal/us/326/465/ ) FWIW, I would doubt one could make a board meeting deductible. (What would be the purpose of traveling somewhere else?)

Third, keep in mind that you probably have other ways to make a travel expense deductible: I.e. go to an industry conference or to a relevant continuing education seminar.

Fourth, with travel expenses you don't get the deduction unless you can document a bunch of stuff. See this discussion: https://www.irs.gov/publications/p463#en_US_2018_publink100034069
I think there's a logical argument for having an off-site meeting, even if there isn't an IRS acceptable reason.

For example, when I try to talk to my wife about business planning, vision, growth strategies, etc - it doesn't work at home. We get distracted by all the other stuff going on and all the cleaning/house projects/baby crying.
So we take a weekend trip every now and then to get to a neutral environment where we can discuss the important stuff. I can make the logical argument that it's necessary, but would I be able to convince an IRS auditor?

First, everybody should know that I have a ton of respect for Chris Care. He's a very good tax CPA.

Second, I think Chris probably could convince an auditor in a situation like he describes. (Bill Gates called these "think weeks" when he would do them...)

But that said, I also think there's a risk here. And also a CPA like Chris can make stuff work that someone who isn't a super-skilled tax accountant might not be able to make work.

CareCPA

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #28 on: October 22, 2019, 07:51:24 PM »
...

Will it hold up under audit or in court? It depends - how much are you willing to pay a lawyer to defend a $14k deduction?

$13,999

As a sole proprietor, can I have a tax deductible board meeting somewhere out of state?

First, you don't have a board of directors if you're a sole proprietorship. So that's a problem.

Second, the real question is whether you meet the requirements for deducting travel expenses which is basically ordinary and necessary expense (so not extravagant) for your business incurred while away from home. To fully deduct trip, it needs to be primarily business. You probably want to read and absorb info here https://www.irs.gov/taxtopics/tc511 ) and maybe even the often-quoted court decision on this topic here... https://supreme.justia.com/cases/federal/us/326/465/ ) FWIW, I would doubt one could make a board meeting deductible. (What would be the purpose of traveling somewhere else?)

Third, keep in mind that you probably have other ways to make a travel expense deductible: I.e. go to an industry conference or to a relevant continuing education seminar.

Fourth, with travel expenses you don't get the deduction unless you can document a bunch of stuff. See this discussion: https://www.irs.gov/publications/p463#en_US_2018_publink100034069
I think there's a logical argument for having an off-site meeting, even if there isn't an IRS acceptable reason.

For example, when I try to talk to my wife about business planning, vision, growth strategies, etc - it doesn't work at home. We get distracted by all the other stuff going on and all the cleaning/house projects/baby crying.
So we take a weekend trip every now and then to get to a neutral environment where we can discuss the important stuff. I can make the logical argument that it's necessary, but would I be able to convince an IRS auditor?

First, everybody should know that I have a ton of respect for Chris Care. He's a very good tax CPA.

Second, I think Chris probably could convince an auditor in a situation like he describes. (Bill Gates called these "think weeks" when he would do them...)

But that said, I also think there's a risk here. And also a CPA like Chris can make stuff work that someone who isn't a super-skilled tax accountant might not be able to make work.
I should clarify for the record that I have not run the expense through the business, since it's not worth my time to try to defend under audit. However, I do think the argument could be made, so it has definitely crossed my mind.

SnipTheDog

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Re: Business Write offs / CPAs / 1800Accountant
« Reply #29 on: January 09, 2021, 12:02:52 PM »
...

Will it hold up under audit or in court? It depends - how much are you willing to pay a lawyer to defend a $14k deduction?

$13,999

As a sole proprietor, can I have a tax deductible board meeting somewhere out of state?

First, you don't have a board of directors if you're a sole proprietorship. So that's a problem.

Second, the real question is whether you meet the requirements for deducting travel expenses which is basically ordinary and necessary expense (so not extravagant) for your business incurred while away from home. To fully deduct trip, it needs to be primarily business. You probably want to read and absorb info here https://www.irs.gov/taxtopics/tc511 ) and maybe even the often-quoted court decision on this topic here... https://supreme.justia.com/cases/federal/us/326/465/ ) FWIW, I would doubt one could make a board meeting deductible. (What would be the purpose of traveling somewhere else?)

Third, keep in mind that you probably have other ways to make a travel expense deductible: I.e. go to an industry conference or to a relevant continuing education seminar.

Fourth, with travel expenses you don't get the deduction unless you can document a bunch of stuff. See this discussion: https://www.irs.gov/publications/p463#en_US_2018_publink100034069

Thank you for the well thought out response.