Tax Tips: Know Before You File

Most retail owners can’t afford to employ a permanent fleet of financial officers. Instead, some hire accounting consultants for tax season, while others opt to do their own filing. Whether you’ve enlisted an accountant’s help or are tackling the task on your own, collecting the right forms, capitalizing on the available deductions, and staying up to date on the latest changes to tax law are essential.

Knowing how the federal government classifies your business is the first step; this will determine the forms needed for your return. Once you have that figured out, it’s time to itemize your deductions.

Auto Expenses. If your business owns a vehicle or you drive a private one for business purposes—other than transit to and from work—you can note this on your filing. Record all business-related miles, and note that the updated federal rate is 48.⁵ cents per mile. (Check out Publication 463 at IRS.gov/publications/p463/index.html.)

Parking. While the meter is running, your tax deductions are growing too. Don’t forget to deduct garage, parking lot and meter charges. If you get a ticket for letting the meter run out or running a red light while on the way to a business meeting, you’re out of luck because the Internal Revenue Service (IRS) doesn’t let you deduct fines from your taxes.

Trade Associations. You can deduct dues for joining trade associations, your local Chamber of Commerce or any other professional group.

Start-up Costs. The government will reward you for starting your own business. Retail owners can deduct many one-time start-up costs, but they must be spread out over the first five years because they are considered capital, not business, expenses.

Business Cards and Stationary. Costs to print new business cards or create new stationary and envelopes are deductible.

Education Expenses. All education and certification programs you or your employees took in 2007 are deductible. Save your receipts.

Legal and Professional Fees. You can deduct what you pay a seasonal accountant. The same goes for lawyers. If they are hired for more than one year, though, the deduction has to occur over the life of the benefit.

Entertainment. You can deduct 50 percent of ordinary and necessary business expenses for entertaining a client, customer or employee if it is directly related to your business or associated with your business. It is essential to keep excellent records for business entertainment expenses.

Business Travel. According to the IRS, Publication 463, travel expenses for conventions are deductible if you can demonstrate that your attendance benefits your business. The IRS also allows you to claim deductions on expenses that are both business and pleasure, as long as business is the primary purpose of the trip. However, if you take your whole family along, you can only deduct your own expenses, just as if you had traveled alone. Likewise, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts. Note: The deduction for business meals is generally limited to 50 percent of the unreimbursed cost.

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