Nothing is deductible. Unless Congress says it is, of course. It is our elected Senators and Representatives, our Congress, that make the tax laws. It is the Internal Revenue Service that is charged with enforcing the tax laws. All income is taxable. The IRS expects you to report all of your income. When you take a deduction, you are subtracting that deduction from you income and you pay less tax. I want you to pay your lowest legal tax, not a penny more. And to do that well, I think you need to know the rules of this tax game. Generally, the cost of food is not deductible. We all have to eat. Food is a personal expense. But food can sometimes be a business expense. And business or job-related expenses can be deductible. You just need to structure the circumstances. Most of the time my husband does the cooking. He loves to cook. He is a good cook. I can cook too. But when I cook now, I make reservations. 🙂 Not long ago we went to dinner at a popular restaurant. The food is always good but this night it was very noisy. I was thinking how hard it would be to have a business conversation in such a noisy place. When you want to deduct the cost of your meals, you need to do certain things. First, there must be a business purpose for this meal. How do you conduct business over a meal? There are several different ways you might have a deductible meal. Is this a business meeting in your place of business? Are you the business owner feeding your employees at a meeting? That meal could be 100% deductible. Are you the business owner entertaining customers at a get-together? Are you a business person entertaining a client at a restaurant. Are you taking a customer or a client to a social event? Those meal expenses could be 50% deductible. Why only 50%? Because the cost of your own meal is not deductible. The cost of your guest’s meal is. But you are not looking at who ordered what, just the whole bill, including tax and tip. How do you make these expenses deductible? DOCUMENTATION is the key! Recordkeeping is what protects your deduction. The expense must be directly related to conducting business. Your objective must be to generate income. After all, this is INCOME tax we are talking about. The business can be conducted immediately before, during or immediately after the meal. The meal cannot be lavish or extraordinary if you want the government to pay for it. Isn’t that what we’re asking when we reduce the income we pay tax on by taking an allowable deduction? Meals with co-workers or associates are generally not deductible. The IRS says you don’t need an actual receipt for meals under $75, but I still encourage my clients to keep all of the receipts you can for any tax deductible expenses. You do still need records to substantiate your deductions. Your records do still need to show for each separate expense: the date, the name of the place, the business purpose (who you entertained), and the amount spent. This amount can include the cost of the meal including tax and tip. I ask my clients if the remember the 5 “w”s of journalism? Write down WHO your entertained, WHAT was the purpose of your meal or event, WHEN (the date) you did this, WHERE you went, WHY this is going to help your business and finally, How Much did you spend? If you do not keep adequate records, you can lose you deduction. So you decide. Is your deduction worth the extra time to protect it, to save it?  

My mother was a Secret Keeper. My father was a private man. They both survived The Great Depression and World War II. I thought it was their generation that kept them tight lipped. I was never taught how to gossip.

 

The very first movie I remember seeing in the theater with my Mother was “Bambi”. In that movie Thumper’s mother told him, “If you can’t say anything nice, don’t say anything at all.”

 

Being a secret keeper means I hold the information you share with me with greatest confidence. I am not your confessional priest who will  absolve you of your sins. I am your Enrolled Agent who can represent you at all levels of the Internal Revenue Service worldwide. Not just nationwide, but anywhere in the world the IRS has an office.

 

I became an Enrolled Agent, an EA, after working five years for the IRS. I was a Tax Audit Supervisor. That specialized training is what I rely on to help me in defending you and your tax return in a tax audit.

 

When I prepare your tax return I look at the information you give me with the eyes of the IRS. I sign your tax return as your preparer based on all information of which I have knowledge. You sign you tax return under penalty of perjury. That  statement is called a “jurat.” It states that you have examined the return and the schedules and attachments, and to the best of your knowledge and belief, they are true, correct and complete.

 

I am thorough when I prepare your return. I want you to pay your lowest legal tax. But I don’t want either of us to invite trouble from the IRS. And as your preparer, I am obligated to answer any IRS question about the preparation of your return. That is different that representing you in an audit.

 

When I represent you in a tax audit I have confidentiality with you, but I do not have the client privilege that an attorney does. If I did NOT prepare your return, and represent you in a tax audit, I have an advantage. I will answer their questions the best I can. But I will not volunteer anything unless I think it will help your case.

 

If you are a new client to me, and I feel there are some audit issues that may reveal the return being examined is not totally accurate, if I think you might be flirting with tax fraud, I will refer you first to a tax attorney. Neither of us were involved in preparing your return, so we don’t have knowledge to answer IRS questions about the process of preparing your return. And if the attorney chooses to engage me to do the work of representing you in the audit, the attorney may choose to extend the client privilege to me for this audit.

 

Does that mean you are making a mistake by choosing me to prepare your return? Heck no! You have the best on your side. My aim is to help you file a complete and accurate return and at the same time avoid an IRS audit. Just like in Las Vegas, what happens at my desk stays at my desk. I am a secret keeper.

 

Always to your lowest legal tax,

Nellie T Williams, EA

I am a solo-preneur. Williams Audit Specialists of Arizona is a single owner corporation. Bullet Proof Your Taxes is one division of Audit Specialists.   Yes, I am a brick and mortar business. Yes, I have employees. There was a time when I had several employees. I still do have one employee. I am my number one employee.   Now that our annual 1040 Marathon has finished, I’ll admit that I am tired. Tax season may have critical dates, but it is never really ever over. Most of us in this business will tell you we love it when tax season begins. And we love it when it ends.   Between April 15th and April 30th employment tax returns for my own firm and for my clients must be prepared, filed, and paid. After-season “Post Mortem” professional meetings are held to share stories of the good, the bad and they ugly of our recent months.   Office hours are adjusted. I may have worked evenings and Saturdays before April 15th. Now that our days are getting longer and warmer, my office hours are getting shorter.   I do taxes all year long. And now I am also adding more services. Now I can attend the seminars I want and need to maintain my various certifications. It is important to me to stay up-to-date in the tax laws, policies and procedures for YOU.   Certain activities that were put on the “back-burner” during income tax season are moved to the forefront. Soon I will begin mid-year tax planning for those of you who want to or who need to adjust your tax withholding.  And now I can resume my coaching services.   Did you see vacation on that list? I didn’t. When I was an employee it was mandatory that we take our annual leave every year. I remember “use it or lose it.” It is important to take a break to re-charge your energy, to renew your spirit. It is also good business that every company require employees to be away from their job for some time every year. If you have someone refusing to take time off, ask yourself,  “What do they NOT want you to know about what goes on at their desk?”   Most years I include an extra personal day at the beginning or at the end of a business trip. There is work involved, but there is also a free day for me and for my husband, Steve, if he comes with me. A hotel room costs the same for one or for two in a room.   I can deduct my travel expense and my meals while away from home on business. And while Steve is very important to me, he is not an integral part of my business so his personal expenses are just that. His expenses are personal and are not tax deductible. I can deduct the cost of my travel and meals. I cannot deduct the cost of Steve’s travel and meals. I am deducting the cost of my hotel room. I just choose to share that room with Steve. There is no extra cost for the second person in the room.   Sometimes I will share the room with another woman attending the same seminar. When we share the room, we share the hotel bill. Of course there are extras that can be added to the room. If you choose to buy from their in-room mini bar that expense is usually not deductible. If you choose to order a movie, it is probably not business-related and would not be deductible. When the hotel adds taxes and a resort fee to your room bill, those are part of your deductible hotel cost.   When I am away from the office my attention is not on the office. My attention is on my seminar or on enjoying my day off. You can still leave me a voice mail message. You can send me an email message. When I return I will give my full attention to you and your needs.   Always to your lowest legal tax,   Nellie T Williams, EA

Does the fear of paying too much tax drive you to buy more deductions? Yes, I said “BUY” deductions. They cost you money, you know. Did you know that our government has a FREE deduction for most of us? That free deduction is called the STANDARD deduction. I say it’s ” free” because you don’t have to spend a dime to claim this one. The amount of your standard deduction does change from year to year and is based on your filing status. Single, Married Filing Jointly, Married Filing Separately, Head-of-Household status all have a different standard deduction.   Categories of Deductions There are various categories of deductions that are allowable on 1040 tax return form Schedule A, Itemized Deductions. These different categories are 1) Medical and Dental Expenses, 2) Taxes You Paid, 3) Interest You Paid, 4) Gifts to Charity, 5) Casualty and Theft Losses, 6) Job Expenses and Certain Miscellaneous Deductions and 7) Other Miscellaneous Deductions. In deciding whether to take the standard deduction or whether to itemize deductions, I ask my clients if they own their own home. And if that answer is yes, I ask if they have a mortgage on their home. Interest paid on a home mortgage is usually the largest of deductions. If you own your own home, you also pay real estate taxes. If you live in a state that has an income tax, those taxes you paid or had withheld from your paycheck are deductible. Because there are states that do NOT impose an income tax, the government allows us to choose to deduct sales taxes paid instead of income taxes paid. And if you have a car, you may also be able to deduct the license plate registration fee. Unusually large medical expenses can also shift you from taking the standard deduction to itemizing deductions. I tell my clients that this is NOT the big deduction I want them to have. Amounts you pay for medical insurance, doctor and dentist visits, prescriptions and lab fees are the common deductions. There are costs that are deductible and there are costs that are NOT deductible. How do you know which is which? Listen to the recording of my August 10, 2012 radio program for more information on medical expenses. LINK   Charitable Contributions Count Too! If you know you want to itemize, then you will also want to look at the gifts you gave to a qualifying charity during the year. These gifts can be money and they can be what I call “stuff.” Money does not just mean paid by cash. Money means cash, check, credit card. The important key is to get a RECEIPT for your gift. The Internal Revenue Service is paying much closer attention to this deduction because of fraudulent deductions claimed every year. Listen to the recordings of my August 31, 2012 and December 7, 2012 radio programs on contributions for more information. Click Here. There are rules to follow (of course! ) for each of the itemized deductions. Listen to the recording of my March 1st radio program for more detailed information. Click Here. In this recording you will hear why I say these deductions take money OUT of your pocket. Is your expense ordinary and necessary? Is your expense one you decided you needed only because you wanted to lower your tax bill? Did you know that if you are in the 15% tax bracket and you spend $1000 on an “elective” deduction. you might save $150 of tax, but you are still out $1000! If you don’t need this deductible expense, don’t spend the $1000. Pay $150 more in tax and you still have $850 in your pocket! If you have a choice, what is YOUR choice? Always to your lowest legal tax, Nellie T Williams, EA