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Deadline for business taxes March 15 - Emil Estafanous, CPA : Emil Estafanous, CPA

Deadline for business taxes March 15

If you meet certain requirements, you can usually deduct certain business losses on your personal tax return.

The deadline to file the taxes for your business is almost here. It’s important to know that, if you meet certain requirements, you can usually deduct your Sub “S” corporation, partnership, LLC and unincorporated business losses on your personal tax return.

The IRS offers non “S” corporations the chance to write off a net operating loss resulting when business expenses exceed income. The two-year carry back period has increased to up to five years for certain losses. This allows for businesses to obtain refunds of taxes paid in prior years, while also allowing flexibility to obtain the greatest benefit from current losses. In other words, an eligible business may elect a three, four or five year period where the loss can be carried back to. The decision of how many prior years, if any, to take the loss in would of course is based on obtaining the largest refund. Generally, if the NOL is at least equal to the total net income for the three, four, and five prior years, the loss would be carried back to the fifth year so that it can be used in all three year years.

Expenses that are common and appropriate for your business are allowed to be deducted from gross income. Business purchases are classified as capital expenses, cost of goods sold or general operating expenses.

For tax year 2010, businesses can immediately deduct equipment and other business assets up to $500,000. For new businesses that started in 2010, up to $10,000 of the first $60,000 of the expenses incurred in starting up the business are eligible to be deducted immediately instead of being deducted over a fifteen year period. However, this amount is reduced dollar for dollar if the startup expense is greater than $60,000.

If your business either purchased items for resale or manufactures products, the value of unsold products are inventory and are not deducted as an expense in the current year.

Other types of business expenses include labor paid to employees, employee benefits, rental of office, warehouse, and equipment used in the business, various licenses and taxes, insurance that is ordinary and necessary, travel, meals and certain entertainment, office supplies, postage and interest paid for money borrowed to finance the business activity, are just some of the costs that can be deducted from business income. Business use of your car and home are also allowable if the proper records are maintained.

It is important to keep business expenses separate from personal, living, and family expenses. A separate bank account is extremely important and one area that the IRS focuses on. No matter the size or nature of your business, you need to operate like a business. Maintaining adequate books and records of your business income and expenses cannot be emphasized enough.

With the complexity of tax laws and the IRS hiring of auditors to fine additional revenue, the hiring of a professional tax preparer is more important than ever.

Remember, business tax returns are due March 15. The penalty for not filing on time has substantially increased to $195 per month per owner/partner.

Emil Estafanous is a Certified Public Accountant, a Southern California-based full service accounting firm serving individuals and small to midsize businesses.

About Emil Estafanous, CPA
Certified Public Accountant (CPA) Tax Professional committed in representing taxpayers and resolving their tax problems.

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