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Business Expenses: When, What, and How to Deduct

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Every business owner knows that you need to spend money to make money, but spending money is only the beginning. You also need to know when the expense can be deducted, whether it actually qualifies as a business expense, and how it should be categorized for tax purposes . In our last three articles, we talked about why recordkeeping matters, what records you should keep, and how long you should keep them. Now, we’re going to build on that foundation by looking at the expenses those records support. We’ll cover: When expenses are deducted under the cash versus the accrual method What makes an expense ordinary and necessary How to handle expenses that are partly business and partly personal Capital expenses Cost of Goods Sold, or COGS If the terms capital expenses and Cost of Goods Sold terrify you, don’t panic. We’re about to dispel some of the mystery behind these categories so you can take advantage of all the legal deductions you’re entitled to and keep more money in your pocket. So...
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How Long Should You Keep Your Business Tax Records?

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Good record-keeping does more than keep your business organized. It helps you accurately report and substantiate the income, expenses, and deductions on your tax returns; but, how long are you supposed to keep those records for? For many business owners, the answer depends on the type of record involved. The Three-Year Rule For most taxpayers, the IRS generally has three years after a return is filed to assess additional taxes. So, if you're talking about ordinary records supporting income and deductions, three years will often get you through the normal statute of limitations. But, as is so often the case with taxes, there are exceptions. The Four-Year Rule If you have employees, you generally need to keep your employment tax records, such as records showing wages paid and taxes withheld, for at least four years. The Six-Year Rule The IRS can generally go back six years if you omitted income that should have been reported and the amount omitted is more than 25 percent of the gros...
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Location: United States
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A Tax Telenovela? Yes! K Alain v. Commissioner

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A look at what the Fifth Circuit’s new limited-partner standard could mean for self-employment tax. Some people think tax is boring. To me, it is an ongoing telenovela: competing interpretations, unexpected reversals, appellate drama, and just when you think you understand where the story is going, somebody files for rehearing. The latest example is K Alain, L.L.L.P. v. Commissioner , decided by the Fifth Circuit on August 12, 2026. At the center of the case is a surprisingly simple question: What exactly is a “limited partner”? That may seem like something the Internal Revenue Code would define. It does not. And that omission has turned into a heated debate over self-employment tax. The Problem Ordinarily, a partner’s share of income from a partnership’s trade or business is included in net earnings from self-employment. But Section 1402(a)(13) creates an exception: a limited partner’s  share of partnership profits is generally excluded from self-employment income. The problem is ...
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Location: United States
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What Records Should Micro Business Owners Keep?

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In the last article, we talked about why good record-keeping matters. Today, we’re going to talk about what kinds of records you should keep . The good news is that you don't need to save every scrap of paper you've ever come across. What you do need is a record-keeping system that clearly documents three things: Money coming into the business Money going out of the business Assets owned by the business Let’s break those down. Income Records Let’s pretend you have a podcast, and you’re doing so well that a company sponsors an episode and you begin earning advertising revenue. Then, bam!, listeners start purchasing your products. Depending on the nature and amount of those payments, you may receive an information return such as a Form 1099. If you have never heard of a Form 1099, that is okay. A 1099 is somewhat similar to a W-2 in that it reports money paid to you. The difference is that, with certain types of 1099 income, you are generally being paid as an independent contra...
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Location: United States
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Why Good Record-keeping Matters for Micro-Business Owners

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Hi Friends!  And welcome! Or welcome back, to Tax Tribe. I’m Wendy Uken, an Enrolled Agent, tax resolution specialist, and the sole proprietor of Tax Tribe. Being an Enrolled Agent means that I am a licensed tax professional authorized to represent taxpayers before the Internal Revenue Service and state taxing authorities.  My primary area of expertise is income tax resolution. For more than a decade, my work has included reviewing tax notices, communicating with government agencies, helping taxpayers return to compliance, and negotiating formal, binding resolutions that champion my clients’ goals; whether that means affordability, asset protection, or privacy. Through Tax Tribe, I want to help micro-business owners keep more money in their pockets by showing you how to maximize the deductions you are legally entitled to and helping you prepare your businesses in case of an audit. But before we get into the nitty-gritty, I want to take a moment to introduce myself to my n...
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Location: United States
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