RE: Engineers As Consultants Pt. 9: Taxes, Write-offs, and Accounting

DAB — Mon, 28 Jul 2014 18:50:42 GMT

Another good post.

Yes, the write off option can be a very useful business tool, but you have to be careful.

If you take a large write off and your business only had a little profit, then you will probably get a call from the IRS, followed by an audit.

The best way to use the write off is to document everything. Identify when you realized you needed the item, why it was not included in your estimate and when you realized that you could not finish the job without the new acquisition.

If you run a small business, you will usually find that the IRS will be very helpful in getting you through the process of deciding how to record your equipment needs. They may force you to declare the equipment as a capital item. In that case, you will have to track depreciation over several years of use. You still get the benefit, but it will take you longer to recoup your expenditure.

So go carefully and always have an accountant and lawyer available to discuss your options.

Yes they are expensive, but you get to write off their fees as a business expense and they might have a neat phrase you can use that puts the item in a better category for tax purposes.

DAB