| Most small business owners have heard that they're | | | | work! You give him a paycheck, he buys the clothes, |
| supposed to get special tax breaks. The problem is, | | | | and you've just turned a personal expense into a |
| they don't know what they are or how to go about | | | | business deduction. The same can be said for building |
| claiming them. Not surprisingly, the IRS doesn't go out | | | | a college fund. If your children work for you, you can |
| of its way to spell it out for you when you go to file | | | | pay them and put the money in the bank for college |
| your income taxes! | | | | costs. Note that even if your children are young, you |
| There is a general rule in tax law that says all "ordinary | | | | can pay them to appear in an advertisement or |
| and necessary" business expenses are deductible. I'll | | | | brochure promoting your business. |
| spare you the details about the arguments over this | | | | Please note that the IRS will scrutinize payments to |
| phrase, but suffice it to say that it basically means that | | | | family members, so you must make sure you dot your |
| in order to be deductible, an expense must be a | | | | i's and cross your t's. Make sure the kids actually work |
| legitimate expense that pertains to your business. | | | | for you, that their pay is reasonable, and that you keep |
| So what personal expenses do you have that could | | | | track of their hours, pay any payroll taxes due and |
| legitimately pertain to your business? Well, let's take an | | | | treat them like any other employee. |
| easy one: Subscriptions. Do you subscribe to your local | | | | Even your vacations may be partially deductible. Try |
| newspaper? Can you deduct it? Well, do you need to | | | | arranging a trip around a business seminar in the |
| keep up on your competitors' advertisements in the | | | | location of your choice. There are usually plenty to |
| paper? Do you need to keep abreast of the job | | | | choose from. Only the expenses for the time actually |
| market via the classified ads to make you more | | | | at the seminar will be deductible, but so will the airfare, |
| effective at hiring and compensating employees? Any | | | | many of the meals and much of your hotel costs. If |
| other reason you might need to read your local paper? | | | | your wife and kids work in the business and there is a |
| If so, you can deduct it. Same with your local business | | | | legitimate reason for them to attend the seminar, their |
| journal, The Wall Street Journal, and various industry | | | | costs may be deductible as well. Keep in mind there |
| and trade publications. | | | | are limitations on this technique, so check with a tax |
| Next is clothing. The IRS says any clothes suitable for | | | | advisor before making your plans. |
| wearing outside of work are not deductible as a | | | | These are a few ideas that could save you hundreds |
| "uniform." So a pair of blue jeans, or even a business | | | | or even thousands of dollars over the life of your |
| suit is not generally deductible. But if your company | | | | business. If you think about other expenses in your life, |
| name is printed on your shirt, jacket or other clothing, | | | | I'll bet you can come up with even more. Remember |
| that item becomes deductible. | | | | to consult a qualified tax advisor before implementing |
| If you have kids, I don't have to tell you how expensive | | | | any of these ideas, be reasonable, and always make |
| they are. Well, how would you like to deduct their | | | | sure the expenses are legitimate. You have every |
| allowance? The cost of their clothes? Heck, even the | | | | right to arrange your affairs so as to result in the |
| cost of their college education? If your kids work in | | | | lowest tax you are legally required to pay. Just don't |
| your business, you can pay them reasonable | | | | cross over the line of common sense and |
| compensation for doing so. So when Johnny needs a | | | | reasonableness. |
| new pair of jeans and a leather jacket, put him to | | | | |