Accountability Plans for Maximizing Your Tax Deductions and Minimizing Audit Risks

With the help of professional accountants providing tax services, you can have better accountability plans in place to maximize tax deductions and minimize audit risks.

As a business owner, you must know that an accountability plan is capable of assisting you with tax deductions, such as home office deductions. Since a lot of people are still continuing to work from home, it is necessary everyone knows how office deductions are applicable.

What Is Meant By Home Office Deduction?

The home office deductions enable qualified taxpayers to deduct a part of their home expenses while filing taxes. Generally, the taxpayers have to exclusively and regularly make use of a part of their home or else of a separate space on their property as their working space, for claiming office deduction. It is not needed, whether you are owning the property.

But the point to be noted is claiming the home office deductions will be affecting the itemized deductions while taking the home office deductions could set a limit to the tax-free gains on the home's future sale.

Eligibility for the Home Office Deductions

Dating back to 2018, the home office deductions is the tax deductions meant for the self-employed, the independent contractors and gig workers – not the w-2 employees, despite being a W2 employee working from home.

But when you are an S-Corp shareholder, multi-member partnership then you have to take help from the tax services from the best accountancy firm in Hobart.

An Accountable Plan Has To Meet the Three Basic Requirements for Maximizing Tax Deductions and Minimizing Audit Risks-

1.The expense with the business connection should be incurred when the employee works for the company and should be ordinary and necessary expenses. These include mileage for driving needed for business matters, mealtimes with clients, and out of pocket travel costs. Even, the mixed-use expenses portions are included, like with the personal and business components, like home office expenses, home internet and cell phones.

2.The home office deductions should be supported by substantiation. So, submit a detailed monthly or quarterly expense report to the ATO in synchronization with bookkeeping to accomplish the goal.

3.The excessive reimbursements over actual expenses should be repaid promptly. If the S corporation is providing an advance for travel expenses to the shareholders, then excess over the actual expenses should be repaid within 120 days.

Having an accountable plan in place, all these reimbursements will be saved from being taxable income to the shareholders or members. So, there is no need for reporting on their W2. While performing the entity formalities, ensure reviewing the accountability plan for supporting tax deductions. Get in touch with the tax services from accounting firms to be clear about your formalities.