Every business incurs expenses – and being able to deduct expenses will reduce your business taxes. For sole proprietors, LLC and corporations, being able to deduct expenses reduces both the regular income tax and the self-employment tax. The bottom line? Keeping track of all your business expenses will go a long way to reducing your tax liabilities.
The basic definition is that an expense must be “ordinary and necessary” for your trade or profession. That definition comes straight out of the tax code (Internal Revenue Code section 162). “An ordinary expense,” the IRS says in Publication 535, Business Expenses, “is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your trade or business.”
When analyzing expenses, you can usually separate expenses into 5 different types:
- Personal expenses
- Business expenses
- Cost of goods sold
- Capital expenses
- Deductible expenses
ABC Consulting’s fees and the licenses, themselves, are business expenses. Like many deductions, license fees and consulting expenses are tax deductible – as long as they qualify as a business expenses. Legal and professional service fees are deductible – including those to ABC Consulting – as long as the fees paid are for work relating to your business and its operation.
As ABC Consulting has always said, “Hire experts to do the things that you don’t like to do or you’re not good at, as soon as possible. Your business was probably built around something you’re an expert in. Do That. Outsource the rest!” We can help you get the licensing you need, keep you in compliance and make sure your employees are trained properly. And all of that? Probably Tax Deductible!
Disclaimer: ABC Consulting isn’t giving tax advice, as we head into tax season, but we want you to be able to ask the right questions of your professional accountant!
*Disclaimer: The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user, or browser; ABC Consulting VA, LLC does not recommend or endorse the contents of the third-party sites. Readers of this website should contact their attorney to obtain advice with respect to any particular legal matter. No reader, user, or browser of this site should act or refrain from acting on the basis of information on this site without first seeking legal advice from counsel in the relevant jurisdiction. Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. The views expressed at, or through, this site are those of the individual authors’ writing in their individual capacities only. All liability with respect to actions taken or not taken, based on the contents of this site, are hereby expressly disclaimed. The content on this posting is provided “as is;” no representations are made that the content is error-free. In no capacity do we represent the Virginia Alcoholic Beverage Control Authority, IRS, SCC or any other government agency.
