Liz Smith, CPA, MSTFP

The cost of educating yourself or your employees is a deductible business expense if it is a condition of employment or maintains or improves skills used in the current business—the courses can’t qualify the student for a new career. In some cases, an education expense might qualify for both the business deduction and a personal…

The list below includes the most common business expense categories that a small business may encounter; it’s not an exhaustive list. In general, you may deduct expenses that are ordinary and necessary for your business. The IRS website defines “ordinary” as something common for your industry and “necessary” as something helpful and appropriate for your…

Our article provides Form 8027 instructions by section, from basic business information to the amounts of tips to be allocated. The form is used to report food and beverage sales, report tips declared by employees, and identify any additional allocation of tips by the employer. It must be completed by large food or beverage establishments,…

The steps below are designed to help you make sense of the IRS Form 8846 instructions for claiming the FICA tip credit. Examples of the completed form have been provided for reference. To prepare the form, you’ll need to have the company’s legal name, EIN, and total tips paid to employees during the year. Form…

Without QJV rules, a business that is not formally organized with a state but is solely owned and operated by a married couple would default to being treated like a partnership for tax purposes—even when there is no official partnership agreement. Being treated as a partnership for tax purposes would subject the taxpayers to more…

The FICA tip credit is an income tax credit claimed by employers in food and beverage industries to offset the cost of the employer FICA they pay on reported tips. It encourages employer reporting of tip income by providing an income tax credit based on the amount of payroll tax paid on employee tip income…

Rental property depreciation is the process of deducting the cost of your rental property over time. With it, investors in income-producing property can deduct the cost of the asset over a series of tax years; the cost of land is not depreciated. The annual depreciation deduction is based on two factors: Your basis in the…

The IRS Section 179 deduction lets business owners deduct the full amount of the cost of qualifying new and used machinery, furniture, vehicles, and certain improvement property up to $1,220,000 in 2024. Property purchased in excess of that threshold is eligible for regular depreciation. In the absence of Section 179, the cost of that same…

To calculate and deduct your bad debt, you’ll need to first determine if the bad debt is business or nonbusiness. Next, you’ll need to calculate the amount and timing of the bad debt and then report it. Before reviewing the details for each step, it’s important to note that a tax deduction for bad debt…

If you see IRS code 570 on your tax transcript, this means that the IRS has frozen your federal income tax refund, pending further internal action. This transcript code (TC) means that there may be an anomaly or discrepancy in the information the IRS has on file for you and that further investigation must be…

You may see bonus depreciation referred to as the special allowance, the additional first-year deduction, or IRC §168 (k) depreciation. Congress created this deduction to stimulate business activity by encouraging business owners to purchase qualifying assets. Without the use of a special accelerated depreciation method, the deduction for the purchase of a business asset would…

IRS code 971 on your transcript means that the IRS has sent you a notice, generally indicating that more time or information is needed to resolve an issue. Notices can cover a wide range of topics, including tax return adjustments, document requests, and account changes. To respond to a transcript code (TC) 971 notice, you…