How To File Purchases as Business Expenses

[stevent2323]

How do I begin to file purchases as business expenses?

What specifications do I need to meet in order for a purchase to become a business expense? E.g. buying a monitor for personal use, and used for the business. Can I claim lower car insurance or get lower taxes by using my car for business purchases.

Perhaps I can loan the car out to my LLC for tax sheltering purchases? I am asking this question broadly for multiple purchases.

Also, what version of tax filing software is preferred? I have used quickbooks in the past for my W4.

 

[pastorpontibus]

@stevent2323 Buy things, keep receipts. No you can't loan your car to your LLC. For vehicles it's common to track milage. Use a gas card or busines credit card. Business vehicle insurance is usually more expensive. QuickBooks is for accounting which is record keeping prior to tax filing. TurboTax would be the tool from Intuit (the makers of QB), there are other options.

Honestly, I usually hate this default answer, but you are so far in the weeds, you need real help. Contact a CPA before doing anything else.

 

[stevent2323]

@pastorpontibus Thank you for your help

 

[llerrad11]

@stevent2323 I used quickbooks. I contacted my CPA and let’s say it was very expensive to learn the hardway. It sounds like you have been operating so there’s no way around the expense to have someone help fix books. I learned a very hard lesson this year on taxes, quickbooks, and what a actually good CPA firm looks like. It’s a mess I would never wish on my worst competitor. But like others have said please contact a CPA… last lesson I learned make sure you are quoted properly through the entire process. CPAs have a hard time understanding startups and treat them like their big cooperate accounts because the similarity “business taxes” I am going to pay for professional bookkeeping potential through my existing Intuit subscription but have found the need to have a dedicated resource no mater my income because it costs me more if I don’t. Hope my experience here helps. Best of luck. Keep winning

 

[stevent2323]

@llerrad11 Thank you for your help

 

[esy]

@stevent2323 I’ll start this by saying I’m in Canada so I don’t know how different things are where you are but generally speaking the situation should be similar in most western countries.

For my corporation, what my accountant recommended and what I do is keep a separate bank account and separate credit card. So I have a business bank account and business credit card and I have a personal bank account and personal credit card.

Now the way to reduce taxes and have your business pay for some of your personal expenses is usually to just pay for justifiable expenses using that business credit card (your accountant will write these as expenses during tax filing time, if you’re doing your own business taxes you’ll need to study on how to do a corporate tax return and then write this expense down). For example, your Internet bill, your phone bill, your car insurance can all be paid using your business credit card/bank account and claimed as business expenses, however, your personal grocery bill, when you pay for a haircut, these things are tough to justify as business expenses so you need to pay these with your personal credit/debit card and can’t claim them.

I would just keep things reasonable. My corporation has 1 employee and not a lot of revenue, so me claiming the cost of 1 vehicle and the insurance on that vehicle is fine. Now if I were to have this same corporation but have it pay for 3 vehicles, then it can raise red flags to the tax authorities because it’s like “why does a such a small corporation need this many corporate vehicles!?”

 

[stevent2323]

@esy Thank you for your help

 

[sherryr0]

@stevent2323 LLCs are not tax shelters. Or tax entities for that matter.

Co-mingling personal and business assets and transactions are troublesome and can lead to increase chances of tax audits as well as loss of your LLC's legal protections. If you need to buy something for the business, buy it for the business.

If you need to utilize a personal vehicle for business use there are accepted ways to do this, the most common being mileage tracking and reimbursement or deducting at the set IRS rate. But keep very good records in case you get audited.

 

[stevent2323]

@sherryr0 Thank you for your help