Page 62 - Small Business Taxes

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The Gig Economy Tax Center streamlines To report suspected human trafficking, call 925 925 Passive Activity and At-Risk Rules
various resources, making it easier for taxpay- the DHS domestic 24-hour toll-free number at
ers to find information about the tax implications 866-DHS-2-ICE (866-347-2423) or 936 936 Home Mortgage Interest
for the companies that provide the services and 802-872-6199 (non-toll-free international). For Deduction
the individuals who perform them. It offers tips help from the NHTRC, call the National Human 946 946 How To Depreciate Property
and resources on a variety of topics including: Trafficking Hotline toll free at 888-373-7888 or
• Filing requirements; text HELP or INFO to BeFree (233733). Form (and Instructions)
• Making quarterly estimated income tax The U.S. Department of the Treasury’s Fi-
payments; nancial Crimes Enforcement Network (FinCEN) Schedule A (Form 1040) Schedule A (Form 1040) Itemized
• Paying self-employment taxes; has issued a public advisory to financial institu- Deductions
• Paying FICA, Medicare, and Additional tions that contains red flag indicators for poten- 5213 5213 Election To Postpone
Medicare taxes; tial suspicious financial activity associated with Determination as To Whether the
• Deductible business expenses; and human trafficking. If warranted, financial institu- Presumption Applies That an
• Special rules for reporting vacation home tions should file a Suspicious Activity Report Activity Is Engaged in for Profit
rentals. (FinCEN 112) with FinCEN to report these ac-
For more information, go to the Gig tivities. For more information, go to Fincen.gov/ See chapter 12 for information about getting
Economy Tax Center at IRS.gov/Gig. Sites/default/files/advisory/FIN-2014-A008.pdf. publications and forms.
Photographs of missing children. The Inter-
nal Revenue Service is a proud partner with the What Can I Deduct?
National Center for Missing & Exploited
Children® (NCMEC). Photographs of missing To be deductible, a business expense must be
children selected by the Center may appear in both ordinary and necessary. An ordinary ex-
this publication on pages that would otherwise 1. pense is one that is common and accepted in
be blank. You can help bring these children your industry. A necessary expense is one that
home by looking at the photographs and calling is helpful and appropriate for your trade or busi-
1-800-THE-LOST (1-800-843-5678) (24 hours ness. An expense does not have to be indis-
a day, 7 days a week) if you recognize a child. Deducting pensable to be considered necessary.
Preventing slavery and human trafficking.
Human trafficking is a form of modern-day slav- Business Even though an expense may be ordinary
ery, and involves the use of force, fraud, or co- and necessary, you may not be allowed to de-
ercion to exploit human beings for some type of duct the expense in the year you paid or incur-
labor or commercial sex purpose. The United Expenses red it. In some cases, you may not be allowed
States is a source, transit, and destination to deduct the expense at all. Therefore, it is im-
country for men, women, and children, both portant to distinguish usual business expenses
U.S. citizens and foreign nationals, who are from expenses that include the following.
subjected to the injustices of slavery and hu- Introduction • The expenses used to figure cost of goods
man trafficking, including forced labor, debt sold.
bondage, involuntary servitude, “mail-order” This chapter covers the general rules for de- • Capital expenses.
marriages, and sex trafficking. Trafficking in ducting business expenses. Business expen- • Personal expenses.
persons can occur in both lawful and illicit in- ses are the costs of carrying on a trade or busi-
dustries or markets, including in hotel services, ness, and they are usually deductible if the Cost of Goods Sold
hospitality, agriculture, manufacturing, janitorial business is operated to make a profit.
services, construction, health and elder care, If your business manufactures products or pur-
domestic service, brothels, massage parlors, Topics chases them for resale, you must generally
and street prostitution, among others. This chapter discusses: value inventory at the beginning and end of
The President’s Interagency Task Force to each tax year to determine your cost of goods
Monitor and Combat Trafficking in Persons • What you can deduct sold. Some of your business expenses may be
(PITF) brings together federal departments and • How much you can deduct included in figuring cost of goods sold. Cost of
agencies to ensure a whole-of-government ap- • When you can deduct goods sold is deducted from your gross re-
proach that addresses all aspects of human • Not-for-profit activities ceipts to figure your gross profit for the year. If
trafficking. Online resources for recognizing and you include an expense in the cost of goods
reporting trafficking activities, and assisting vic- Useful Items sold, you cannot deduct it again as a business
tims include the Department of Homeland Se- You may want to see: expense.
curity (DHS) Blue Campaign at DHS.gov/blue-
campaign, the Department of State Office to The following are types of expenses that go
Monitor and Combat Trafficking in Persons at Publication into figuring cost of goods sold.
State.gov/j/tip, and the National Human Traf- 334 334 Tax Guide for Small Business • The cost of products or raw materials, in-
ficking Resource Center (NHTRC) at cluding freight.
humantraffickinghotline.org. DHS is responsible 463 463 Travel, Gift, and Car Expenses • Storage.
for investigating human trafficking, arresting 525 525 Taxable and Nontaxable Income • Direct labor (including contributions to pen-
traffickers, and protecting victims. DHS also sion or annuity plans) for workers who pro-
provides immigration relief to non-U.S. citizen 529 529 Miscellaneous Deductions duce the products.
victims of human trafficking. DHS uses a victim- 536 536 Net Operating Losses (NOLs) for • Factory overhead.
centered approach to combating human traf- Individuals, Estates, and Trusts Under the uniform capitalization rules, you
ficking, which places equal value on identifying must capitalize the direct costs and part of the
and stabilizing victims and on investigating and 538 538 Accounting Periods and Methods indirect costs for certain production or resale
prosecuting traffickers. Victims are crucial to in- 542 542 Corporations activities. Indirect costs include rent, interest,
vestigations and prosecutions; each case and taxes, storage, purchasing, processing, repack-
every conviction changes lives. DHS under- 547 547 Casualties, Disasters, and Thefts aging, handling, and administrative costs.
stands how difficult it can be for victims to come 583 583 Starting a Business and Keeping
forward and work with law enforcement due to Records This rule does not apply to small business
their trauma. DHS is committed to helping vic- taxpayers. You qualify as a small business tax-
tims feel stable, safe, and secure. 587 587 Business Use of Your Home payer if you (a) have average annual gross
Chapter 1 Deducting Business Expenses Page 3