Expert Advice: Tax Tips

Kurt Guth, EA, CISA
Corporate Officer
American Tax Service, Inc.

Should I go for a bigger refund or maximize take-home pay?

People always ask whether or not they should get a bigger refund or withhold less to maximize take-home pay from work. This is heavily fact-dependent on whether or not the person asking is more or less responsible when it comes to their finances. I’ve changed my advice over time from the motto of “taxes are like fine wine, don’t open that bottle until it’s time,” meaning minimize your refund or even pay in at tax time. Now it’s “everybody gets refunds!” With recent tax law changes, it is better that people withhold enough over the course of the year to get refunds, even if they are bigger, than have to pay in.

Another reason to be more conservative and possibly get a bigger refund is that the way that the IRS is recommending withholding is about to change. Your W4 form will look different. With those changes, people are bound to be confused, so taking the more cautious route is advisable at least for
2020.

Is my gym membership a deductible business expense?

Your gym membership is not generally deductible unless it meets the “ordinary and necessary” definition of a business expense, meaning they are common and accepted in your industry and helpful to your business. Gym memberships are very difficult to justify. Networking reasons are usually not sufficient to meet the ordinary and necessary standard.

Can my business pay for my personal car?

You can pay your personal car loan from your business, but you would classify that as an owner draw or distribution, not a business expense you can write off. The appropriate method for deducting vehicle expenses should be discussed with your tax professional.

What documentation should I keep for my business expenses?

You should always keep receipts for business expenses along with accounting records that show the reason for the expense and the cleared method of payment, such as a statement. If one of those is missing, the IRS could disallow the expense—so may your accountant, but we generally can take your word for it that all three exist.

Are meals a deductible business expense?

You can still deduct business meals for local business discussions with clients and/or colleagues. Under the new tax laws effective in 2018, you must conduct business with the potential client or colleague at the time of the meal. The old law allowed the meal to be deductible if it was associated with the conduct of business, even if it was before or after the meeting. The deduction remains at 50% of the cost. There are quite a few scenarios so be sure to talk with your tax professional to get more clarification.

Can I deduct gifts?

You can deduct business gifts up to $25 per person, per year. Anything above that amount is non-deductible. Keep in mind that if you use promotional items that cost less than $4.00 and have your company name or logo engraved on them, those are ignored as gifts. I don’t know anyone who engraves items that cost less than $4.00, but that’s the IRS for you!