Page 107 - Small Business Taxes

16:31 - 2-Feb-2023
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Impairment-related expenses. If you are dis- trade or business, may be deductible on Sched- with a notice on the part of dues that is allocable
abled, you can deduct expenses necessary for ule A (Form 1040) if you itemize deductions. to nondeductible lobbying and political expen-
you to be able to work (impairment-related ex- For more information, see Pub. 529. ses, you can’t deduct that part of the dues.
penses) as a business expense, rather than as
a medical expense. Certain payments made in sexual har- Covered executive branch official. For
You are disabled if you have either of the fol- assment or sexual abuse cases. For purposes of this discussion, a “covered execu-
lowing. amounts paid or incurred after December 22, tive branch official” is any of the following.
2017, new section 162(q) provides that no de-
• A physical or mental disability (for exam- duction is allowed under section 162 for any 1. The President.
ple, blindness or deafness) that function-
ally limits your being employed. settlement or payment related to sexual harass- 2. The Vice President.
• A physical or mental impairment that sub- ment or sexual abuse if it is subject to a nondi- 3. Any officer or employee of the White
stantially limits one or more of your major sclosure agreement. In addition, attorney’s fees House Office of the Executive Office of the
related to such a settlement or payment aren’t
life activities. allowed as a deduction. President and the two most senior level of-
The expense qualifies as a business ex- ficers of each of the other agencies in the
pense if all the following apply. Tax preparation fees. The cost of hiring a Executive Office.
• Your work clearly requires the expense for tax professional, such as a certified public ac- 4. Any individual who:
you to satisfactorily perform that work. countant (CPA), to prepare that part of your tax
• The goods or services purchased are return relating to your business as a sole pro- a. Is serving in a position in Level I of the
clearly not needed or used, other than inci- prietor is deductible on Schedule C (Form Executive Schedule under section
dentally, in your personal activities. 1040). You can deduct the expenses of prepar- 5312 of title 5, United States Code;
• Their treatment isn’t specifically provided ing tax schedules relating to rental properties b. Has been designated by the Presi-
for under other tax law provisions. on Schedule E or farm income and expenses dent as having Cabinet-level status;
on Schedule F. Expenses for completing the re- or
Example. You are blind. You must use a mainder of the return are miscellaneous deduc-
reader to do your work, both at and away from tions and are no longer deductible. c. Is an immediate deputy of an individ-
your place of work. The reader's services are You can also claim a business deduction for ual listed in item (a) or (b).
only for your work. You can deduct your expen- amounts paid or incurred in resolving asserted Exceptions to denial of deduction. The
ses for the reader as a business expense. tax deficiencies for your business operated as a general denial of the deduction doesn’t apply to
sole proprietor. the following.
Internet-related expenses. Generally, you • Any in-house expenses for influencing leg-
can deduct Internet-related expenses including Licenses and regulatory fees. Licenses and islation and communicating directly with a
domain registration fees and webmaster con- regulatory fees for your trade or business paid covered executive branch official if those
sulting costs. If you are starting a business, you annually to state or local governments are gen- expenses for the tax year don’t exceed
may have to amortize these expenses as erally deductible. Some licenses and fees may $2,000 (excluding overhead expenses).
startup costs. For more information about amor- have to be amortized. See chapter 8 for more • Expenses incurred by taxpayers engaged
tizing startup and organizational costs, see information. in the trade or business of lobbying (pro-
chapter 8. fessional lobbyists) on behalf of another
Lobbying expenses. Generally, lobbying ex-
Interview expense allowances. Reimburse- penses aren’t deductible. Lobbying expenses person (but does apply to payments by the
other person to the lobbyist for lobbying
ments you make to job candidates for transpor- include amounts paid or incurred for any of the activities).
tation or other expenses related to interviews following activities.
for possible employment aren’t wages. You can • Influencing legislation. Moving machinery. Generally, the cost of
deduct the reimbursements as a business ex- • Participating in or intervening in any politi- moving machinery from one city to another is a
pense. However, expenses for food and bever- cal campaign for, or against, any candidate deductible expense. So is the cost of moving
ages are subject to the 50% limit discussed ear- for public office. machinery from one plant to another, or from
lier under Meals. • Attempting to influence the general public, one part of your plant to another. You can de-
or segments of the public, about elections,
Legal and professional fees. Fees charged legislative matters, or referendums. duct the cost of installing the machinery in the
new location. However, you must capitalize the
by accountants and attorneys that are ordinary • Communicating directly with covered ex- costs of installing or moving newly purchased
and necessary expenses directly related to op- ecutive branch officials (defined later) in machinery.
erating your business are deductible as busi- any attempt to influence the official actions
ness expenses. However, legal fees you pay to or positions of those officials. Outplacement services. The costs of out-
acquire business assets usually aren’t deducti- • Researching, preparing, planning, or coor- placement services you provide to your employ-
ble. These costs are added to the basis of the dinating any of the preceding activities. ees to help them find new employment, such as
property. Your expenses for influencing legislation career counseling, resume assistance, skills as-
Fees that include payments for work of a and communicating directly with a covered ex- sessment, etc., are deductible.
personal nature (such as drafting a will or dam- ecutive branch official include a portion of your The costs of outplacement services may
ages arising from a personal injury) aren’t al- labor costs and general and administrative cover more than one deduction category. For
lowed as a business deduction on Schedule C costs of your business. For information on mak- example, deduct as a utilities expense the cost
(Form 1040). If the invoice includes both busi- ing this allocation, see section 1.162-28 of the of telephone calls made under this service and
ness and personal charges, figure the business regulations. deduct as a rental expense the cost of renting
portion as follows: multiply the total amount of You can’t claim a charitable or business ex- machinery and equipment for this service.
the bill by a fraction, the numerator of which is pense deduction for amounts paid to an organi- For information on whether the value of out-
the amount attributable to business matters, zation if both of the following apply. placement services is includible in your employ-
and the denominator of which is the total • The organization conducts lobbying activi- ees' income, see Pub. 15-B.
amount paid. The result is the portion of the in- ties on matters of direct financial interest to
voice attributable to business expenses. The your business. Penalties and fines. Penalties paid for late
portion attributable to personal matters is the • A principal purpose of your contribution is performance or nonperformance of a contract
difference between the total amount and the to avoid the rules discussed earlier that are generally deductible. For instance, you own
business portion (figured above). prohibit a business deduction for lobbying and operate a construction company. Under a
Legal fees related to doing or keeping your expenses. contract, you are to finish construction of a
job, such as those you paid to defend yourself building by a certain date. Due to construction
against criminal charges arising out of your If a tax-exempt organization, other than a
section 501(c)(3) organization, provides you delays, the building isn’t completed and ready
Page 48 Chapter 11 Other Expenses