A Dozen Small Business Deductions   Small-business tax rule number one: Don't mess with the IRS. But that doesn't mean you should cheat yourself. Take every legal deduction you can. Here are a dozen that even savvy small-business owners and entrepreneurs sometimes forget:   1. HOME OFFICE Concerned that claiming a home-office deduction is tantamount to sending an engraved invitation to an Internal Revenue Service auditor? Don't be! We rarely see audits triggered as a result of claiming a home office deduction.   2. OFFICE SUPPLIES Even if you don't take the home-office deduction, you can deduct the business supplies you buy. Hang onto those receipts, because these expenditures will offset your taxable business income.   3. FURNITURE When your office supplies are more than just pens and paper, you have another tax-cutting opportunity. Office-furniture acquisitions provide a couple of choices. Deduct 100 percent of the cost in the year of the purchase or deduct a portion of the expense over seven years, also known as depreciation.   4. OTHER EQUIPMENT Items such as computers, copiers, fax machines and scanners also are tax deductible. As with furniture, you can take 100 percent up front or depreciate (this time over five years). Heavy duty vehicles like SUV's may even qualify for a 100 percent deduction if it is used solely for business purposes and has a gross vehicle weight greater than 6,000 pounds.   5. SOFTWARE The recently increased Section 179 provides another tax break in this area of business expenses. Previously, a company had to depreciate the cost of computer software over three years. Now, off-the-shelf software business buys can be fully expensed in the year purchased. As with the other expenses covered under this part of the tax code, the deductions are allowed for tax years 2003, 2004 and 2005.   6. MILEAGE If you drive for business, the IRS wants to give you some of your money back. But Uncle Sam loves documentation, so keep a notebook in your vehicle to record the date, mileage, tolls, parking costs and the purpose of your trip. At the end of the year, you have two choices. You can total the mileage, multiply by 36 cents per mile for your 2003 tax computations, and add in the tolls and parking to calculate your deduction. (The business mileage rate goes to 37.5 cents a mile in 2004.) Or you can measure your business usage against your personal driving and deduct that portion of your auto-related expenses. Remember to include gas, repairs and insurance. If you are leasing, include those payments. If you buying the car, factor in the interest on your loan and the depreciation on your vehicle.   7. TRAVEL, MEALS, ENTERTAINMENT AND GIFTS Good news, small-business travelers. You might as well stay in a nice hotel, because the entire cost is tax deductible. Likewise, the cost of travel -- air, rail or auto -- is 100 percent deductible, as are costs associated with life on the road (dry cleaning, rental cars and tipping the bellboy). The only exception is eating out. You can deduct only 50 percent of your meals while traveling. So stay at the Ritz and eat at Wendy's. Once you get home, your on-the-job meals aren't deductible -- unless you bring along a client to talk business. In this case, you might consider splurging on a fancier meal because then you can write off half such work-related dining costs. The 50-percent deduction limit applies to most other client entertainment expenses, too. But a direct gift to a client or employee is 100 percent deductible, up to $25 per person per year.   8. INSURANCE PREMIUMS Self-employed and paying your own health insurance premiums? On 2003 returns, these costs are 100 percent deductible, up from the 70 percent deduction allowed the tax year before. This break primarily benefits proprietorships, but there are limits. The deduction can't be more than your business' net profit. And it's not allowed if you were eligible for other health care coverage, including that offered by your employed spouse's medical plan.   9. RETIREMENT CONTRIBUTIONS Are you self-employed and saving for your own retirement with a SEP-IRA or Keogh? Don't forget to deduct your contribution on your personal income tax return.   10. SOCIAL SECURITY The bad news: If you're self-employed or starting a small business, you have to pay double the Social Security contributions you would as an employee. That's because federal law requires the employer pay half and the employee pay half. Self-employed workers are both, meaning the total will equal 15.3 percent of your net profits. The good news: You can deduct half of the contribution on your 1040.   11. TELEPHONE CHARGES You can deduct the cost of the business calls that you make for business from home or mobile phone. When your bill comes in, circle the business-related calls, total them up and keep a copy. At the end of the year, tally your 12 bills and deduct 100 percent. The IRS assumes that you will have a phone in your house anyway, so regular fees and charges don't count toward your deduction. But if you have a second line installed or a cell phone and use it only for business, all of these charges are deductible.   12. CHILD LABOR Employing your kids for valid business reasons is very attractive. If you paid them up to $4,750 in 2003, they probably avoided any additional taxes. Plus, there is no Social Security tax when you hire your child who is 17 or younger and you can deduct the salary as a business expense. This break is available, however, only if you operate as a sole proprietor or as a partnership in which you and your spouse are the only partners. If your business runs as a corporation, then it, not you, are considered the employer and the corporation is not relieved of the tax liabilities.   The content of this transmission does not constitute a professional service. Always consult with a competent professional service provider for advice on tax, accounting, and other financial matters specific to your situation. If you wish to engage our firm for this purpose, please contact our office. You can't manage what you can't measure.   The #1 reason small businesses miss out on valid tax deductions is poor record keeping and accounting systems. We can help you implement systems which will enable you to manage your business effectively by maximizing economic profitability and tax benefits.     New Law to Boost Small Business Loans     President Bush signed legislation Monday that will increase loan authority for the U.S. Small Business Administration's flagship 7(a) loan program by more than $3 billion. The 30 percent increase in small business loans for the current year will allow the SBA to lift a three-month- old cap of $750,000 on 7(a) loans and drop restrictions on piggyback loans.   The new law increases the 7(a) program's lending authority for this year to $12.5 billion, allowing the program to reach up to 90,000 small businesses in fiscal year 2004, creating or retaining up to 500,000 jobs for hard-working Americans.   The legislation also allows the SBA to immediately remove the $750,000 cap on 7(a) loans, returning it to its previous $2 million level. The bill also raises the maximum on SBA Express loans to $2 million and allows the SBA to raise the maximum guaranty on loans up to $2 million to 75 percent. Piggyback loans will once again be allowed.   Business Calculators (click one of the links below) Loan Amortization - Enter your desired payment - and let us calculate your loan amount. Or, enter in the loan amount and we will calculate your monthly payment! Breakeven Analysis - Find out how many and what price you must sell your product at to make a profit. Financial Ratios - This calculator helps you to zero in on areas of your business that may need attention. Areas such as solvency, liquidity, operational efficiency and profitability. Inventory Analysis - Use this calculator to determine how much inventory you should hold, and efficient timing of your inventory orders. Cash Flow Calculator - Having adequate cash flow is essential to keep your business running. Use this calculator to help you determine the cash flow generated by your business. Working Capital Needs - Working capital is essential to running your business. This calculator assists you in determining your working capital needs for the next year. Business Valuation - Enter your cash flow information, your cost of capital and your growth rate to determine your business NPV valuation.   Equipment Buy vs. Lease - Should you lease your equipment or finance it? Find out with this calculator!