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  4.  » Encino Business Lawyer: Deduct Expenses from Your Retirement Business

Encino Business Lawyer: Deduct Expenses from Your Retirement Business

| May 11, 2018 | Business, Estate Planning, Retirement |

Financial Planning Retirement

Many people begin a second career in their retirement years by starting a new business. A retirement business allows you to stay busy and work as little or as much as you’d like while making some extra money to complement your retirement. However, you want to make sure that your business is not impacting the amount of money you have to enjoy your retirement. That is why you should look to maximize your deductible expenses from your retirement business.

To ensure that your expenses are actually deductible by IRS standards, they need to meet the “ordinary and necessary” requirements set forth by the IRS. As defined by the courts, ordinary means “normal, common, and accepted under the circumstances by the business community,” while necessary means “appropriate and helpful.” In terms of ordinary and necessary, the IRS and courts generally find that the purpose for the expense must fit those guidelines, such as office supplies, business travel and rent paid for office space. However, if that same office space is not actually used for business purposes, then that expense cannot be deducted from business taxes.

You also must be careful not to deduct personal expenses as business expenses, such as commuting costs. Commuting costs are explicitly named in the business tax code as a personal expense, not a business expense. This also applies to any personal expenses put on a business credit card or payments made to family members, which often put IRS auditors on high alert. These types of expenses and deductions can lead to an audit of your business and leave you liable to fines and fees. This is why it’s so important to consult with a team of professionals, including attorneys that are experienced with business, tax, and retirement laws, to make sure you take the allowable deductions and do not negatively impact your retirement business or savings. Once those issues are settled, you can also concentrate on taking the appropriate deductions to enjoy your retirement while still operating your business.

If you would like to get more information about business tax planning, or if you’d like to discuss your current situation regarding your retirement business, please set up an appointment at our Encino business planning office by calling (818) 905-6088.

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