Tax expert, Eva Rosenberg, explains the importance of keeping excellent records of all your business expenses, especially for when it comes to getting deductions.
Folks watch rich, successful business owners traveling first class, getting box seats at sporting events, and, just generally, living large. It must be glorious to have a business where you can deduct an entire high-flying lifestyle as a legitimate business expense. What a great reason to have your own business!
What does the IRS think about lavish and extravagant expenses?
Weeeeelllll, not impressed. The IRS regularly disallows excessive deductions for taxpayers with average businesses and income levels. So what can YOU do to get away with deducting the high-life?
Simple. One of TaxMama’s® favorite mantras:
Document. Document. Document.
Keep excellent records about these first-class trips – and the contacts you made – and the results of those contacts. Let’s face it, there are some people you will never be able to meet unless you travel in wealthy circles. That means flying first class and using the first-class lounges to meet (but not harass) important, successful people. It means attending fund-raising events for charities where the specific people you want to meet congregate. In fact, in places like that, consider volunteering to help out. It gives you the chance to meet people in a neutral way – and perhaps to be able to chat with them later during the events. It helps to do some research (the Internet is an open book) about where the people you want to meet hang out, what charities or events they attend, and when and where they are traveling.
Once you are able to talk to your chosen contacts, if you have a really catchy elevator pitch or value proposition, you’ll get their attention.
Keep detailed records of the results of these encounters. You won’t get a sale or an appointment every time. But if you really are spending these funds to make solid contacts, rather than to simply have a ball, you will generate appointments, get new clients, perhaps investors, or maybe even meet the ideal vendor who would never have been willing to be your supplier because you don’t have the contacts to open the door.
Another interesting thing can happen. If they are not the right people, they may well know the perfect person for you – and might be willing to make introductions.
Frankly, I haven’t taken the plunge to spend excessively or lavishly. And being seriously shy, I envied people who had the skills to strike up conversations with strangers. But, over the years, I have learned how to start a conversation – by expressing interest in other people, or by volunteering at events, or by challenging people to step out of their comfort zones. As a result, I have had lots of interesting adventures with some rather important people – but those are stories for another book.
For now, just know, that when you want to claim deductions that seem excessive or unusual, if you can provide a valid business purpose – you get to keep the deduction!
Read Chapter 6 of Small Business Taxes Made Easy to learn more about deductions.
more about how to improve your business – or your clients’ businesses. I am teaching a 12-part series of courses at CCH
CPELink, based on the first 12 chapters of the
book. Please join me – and invite your
They will understand why they need to consult you to rebalance their tax and business plan each year.
The latest edition of my book, Small Business Taxes Made Easy contains complete updates about the business considerations, from the PATH Act of 2015, up to and including the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) of 2019; and the Taxpayer Certainty and Disaster Tax Relief Act (TCDTRA) of 2019. The new book, in print, Kindle and audio is available now!