CPE for Certified Public Accountants

Course Content 

Section 1: Audit-Proof Your Tax Records 

Failure to keep good business documentation causes Business Professionals to not only lose tax deductions, but also face potential fraud and other penalties. Having names exposed by the IRS as “tax cheats” in the local newspapers is devastating to any professional. This section helps to make sure that Business Professionals do not “take short cuts” or “cheat” and, therefore, the professional is enhanced.  

Section 1 of our seminar, among other things, is designed to: 

1.       Make customers aware of the consequences if they fail to keep proper tax records;

2.       To show the student the kinds of records they will need to maintain for tax related purposes; and

3.       To give the student a simple system to audit-proof their records

 Tax deductions depend totally on the consumers with who you do business. Good tax records must mirror the professional’s appointment book.

Section 2: Get The Most Out Of Your Tax Deductible Entertainment Expenses  

When a Business Professional is meeting a customer, it is likely that they will stop with their customer for refreshments and/or food. The informal settings give the customer a comfortable atmosphere to discuss business with their sales professional, thus allowing the business professional to effectively uncover the customer’s needs, affordability and desires. Done properly, this is a tax deductible expense.

Under the new rules, Business Professionals are allowed to deduct only 80% of the amount spent for most types of entertainment. Moreover, the new law requires them to discuss business while dining with customers. Further, the law requires that such business meals take place in surroundings conducive to business discussions and be arranged for the purpose of discussing specific business. 

Often a Business Professional will give a customer a thank-you gift. Gifts of less than $25 are not taxable income to customers. Professionals can deduct up to $25 only if the professional documents all five elements of support required by the tax law – and then the cost is deductible only to the extent that is less than $25.

 Section 3: Combine Personal Pleasure and Vacations with Business Travel

 The travel section of the seminar contains a detailed discussion of how personal pleasure can be combined with a legitimate business trip. The Business Professional will learn the difference between “travel expenses” and “on-the-road expenses”. A deductible trip depends on the number of hours spent on business each day and the number of days spent on business for the trip.  The combination impacts the deductions for daily expenses and determines the deduction for trip expenses. Emphasis is given, as it is in every section, to proper documentation that meets the toughest IRS standards. In addition, IRS has specific questions that must be answered in writing for each and every deductible travel day.  Our flow-charts help Business Professionals determine their travel expenses deductibility. 

Individuals who own real estate, collect rent, and actively participate in day-to-day operations of rental property will obviously have to make some trips to insure that their property is in good condition. They could check on rents in the area, make repairs, and speak with vendors. 

Section 4: Benefits from Hiring, Leasing From. And Going Into Business with Relatives

 As an independent contractor, the Business Professional gains numerous tax advantages over an employee. This section will cover who the Business Professional can hire to help him or her in his or her capacity as an independent contractor. We will cover how to hire your spouse and/or children in your business, how payment benefits are handles and quarterly tax payments.

 Section 5: Get Your Maximum Business Automobile Deductions

 We discuss all the record keeping requirements for the automobile, including how to deduct more that one car at a time. We also delve into the commuting miles and discuss how to determine which miles are for business, investment, commuting, or personal.

 Section 6: Produce Tax-Free Income with an Office in Your Home

Over 20 million taxpayers meet the criteria for the home-office deduction, but only 4 million actually claim the deduction. The home-office deduction is intertwined with the personal residence tax law rules for the new $250,000/$500,000 Universal Exclusion. Proper attention must be paid to the rules or the portion of the home devoted to the office will be lost with respect to tax benefits.  

We discuss how the home must be divided between business and personal use to arrive at an allocable square footage for purposes of allocating deductible mortgage interest, real estate taxes, utilities, homeowners insurance, general repairs, and pest control. We discuss how depreciation is calculated on the home office (as commercial property) over 31.5 years under the new law.

 There are new rules on renting home -office space to corporations; therefore, corporate owners/shareholders will not want to purchase homes with the exception of receiving a tax benefit from the corporate rental or home-office space.

There are complications in the area of depreciation. First, the home office is commercial property even though most people think of it as residential property. Accordingly, it must be depreciated for regular tax purposes over 31.5 years. For alternative minimum tax purposes, it must be depreciated over 40 years. Both the 31.5 and the 40-year depreciation amounts must be calculated under the straight-line method.

 It is important to know that if you qualify for the home-office deduction by converting a portion of your existing home to an office in a year subsequent to the year of purchase, which you are subject to the lower-of-cost-or-market rule. Under this rule, your depreciation is computed using either the original cost of the home plus improvements, or the fair market value at the date of conversion, whichever is lower.

 Vital for a home-office deduction is that an allocation be made between the cost of land and building. Failure to make the allocation has resulted in loss of deductions. Documentation for this land and building allocation can be supported with the tax assessor’s statement or an independent appraisal.

 The Tax Reform Act of 1986 says that no home-office deduction can produce tax benefits in excess of income derived from the home office activity. Thus, unlike any commercial office, the home office is subject to special rules that prohibit loss deduction in loss years, but allow deductions in years where there is taxable income derived because of the home-office activity.

 To document a home office, twelve separate and distinct steps should be taken. Each is interrelated, but separate, and all twelve are carefully covered in the seminar. 

Section 7: IRS Audits

 Any discussion of taxes is incomplete without a discussion of how the IRS audits tax returns.

 Perhaps the most important thing from the consumer standpoint is how to audit proof a tax return. Say, for example, that you have a rather unusual rental property that produces exceptional rental losses in one tax year. We show what questions the IRS would ask from the Internal Revenue Audit Manual and discuss how these should be answered and intertwined in the tax return.

 A casualty loss deduction, for example, should be supported by verbal comments in a supporting statement attached to the tax return. How the fire started and a copy of the fire department’s report add crucial data to the return. Detailed computations in a supporting schedule that look exactly like the audit manual examples help reduce the chances of audit and increase compliance with income tax laws as they relate to the taxation of real estate transactions.