Starting Your Business/Keeping Tax Records
What are Business Expenses
Fees
Legal and professional fees. Legal and professional fees,
such as fees charged by accountants, that are ordinary and necessary expenses directly
related to operating your business are deductible as business expenses. However, you
usually cannot deduct legal fees you pay to acquire business assets. Add them to the basis
of the property.
If the fees include payments for work of a personal nature
(such as making a will), you take a business deduction only for
the part of the fee related to your business. The personal portion
of legal fees for producing or collecting taxable income, doing
or keeping your job, or for tax advice may be deductible on Schedule
A (Form 1040) if you itemize deductions. See Publication
529.
Tax preparation fees. You can deduct as a trade or business
expense the cost of preparing that part of your tax return relating
to your business as a sole proprietor. The remaining cost is deductible
on Schedule A (Form 1040) if you itemize your deductions.
You can also take a business deduction for the amount you pay or
incur in resolving asserted tax deficiencies for your business as a sole proprietor.
Licenses and regulatory fees. Licenses and regulatory
fees for your trade or business paid each year to state or local
governments generally are deductible. Some licenses and fees may
have to be amortized. See Chapter
9 (Amortization) for more information.
Important References:
Publication
535
Business Expenses
Form
1040 Schedule C Profit or Loss From Business