California tax codes can be confusing to navigate. Many individuals and companies miss out on potential deductions and benefits every year by not knowing they exist. Our team at Fishman, Larsen & Callister is here to share a few business tax deductions you can claim in California.
Our Background
At Fishman, Larsen & Callister, we’ve spent years helping the people throughout Fresno and the Central Valley with their tax concerns. Our team of lawyers has a combined legal experience of over 90 years, working on California cases.
Some awards our team has earned include shareholder Jared R. Callister being named a rising star by Super Lawyers in 2013, and shareholder Robert G. Fishman earning an AV Preeminent ranking from Martindale-Hubbell.
Why Business Tax Deductions Matter
California is the 4th largest economy in the world, making it a key financial capital. Part of this fact could be due to California being home to the most Fortune 500 corporations out of any state. These businesses understand how to navigate the tax structure, and so should you.
Business tax deductions are defined as any ordinary or necessary expenses your company incurs during a fiscal year. Deductions are an important element for anyone doing business in California to understand. You can often combine deductions with tax credits, which take effect at the final stage of tax filing. For many business owners, the result is that they only pay the franchise or LLC minimum annual tax.
Hire a Tax Planning Lawyer
Finding all eligible deductions can be a lengthy process that many business owners do not have the time for. While it is possible to do so on your own, it is recommended that you hire a tax planning lawyer. Your California tax planning lawyer can help you find a pathway forward that can avoid needless fees and save you money.
The following are a few common expense types used as business tax deductions:
- Operating expenses. Rent for your office or place of business, and leases on equipment
- Insurance payments. Insurance for your office, workers’ compensation, and all other plans for your company
- Employee costs. Wages, salaries, contractor payments, and payroll taxes you pay
- Marking and advertising. Any funds spent on promotional items, advertisements, website design and hosting, or sponsorships
- Travel expenses. Any hotel room, meals, flights, or mileage for work vehicles
- Employee education and training. Bringing in specialists for seminars, classes to further employee education, certificate programs, or any other costs used to improve your employees’ skills related to your business
- Professional services. Services from lawyers, accountants, and consultants
Tips for Business Tax Deductions
Your ability to claim an expense as a deduction on your taxable income relies on your ability to prove that it was required for your company’s operations. There are a few steps you can take that can strengthen your deductible while filing your taxes. The first is to keep documentation for all expenses. Evidence for a cost is essential in the case that the IRS requests proof.
Another vital thing to remember is to keep your personal and business finances separate. Using the same bank account for all expenses can seem suspicious in the case of an audit and make it difficult to justify business costs. Having separate accounts maintains a clear division and strengthens your deduction case.
Something important to remember is that not everything can be deducted from your taxable income for its full amount. One example is business meals, which can be deducted for half the cost. Deducting too much can lead to penalties and issues later on.
FAQs
Q: How Much Does a Tax Planning Attorney Cost in California?
A: How much your tax planning attorney costs depends on the size of your company, the complications of your tax records, and the work hours your case requires. A case for a small business with few employees and minimal operational costs will generally be cheaper than tax planning for large corporations with hundreds of employees and endless expense reports. A tax planning attorney familiar with your situation can provide an estimate for how much the final bill may be.
Q: What Are Common Tax Deduction Mistakes in California?
A: Many business owners make easy mistakes when claiming tax deductions. The first common error is messy bookkeeping. Clear documentation is required when claiming expenses as a deduction. Another frequent mistake business owners make is comingling personal and professional finances.
Not only can this open you up to penalties, but it can also affect your ability to deduct valid business fees. The third prevalent blunder many people make is deducting an expense for the full amount when it is not allowed.
Q: Do You Need a Tax Planning Attorney to Claim Deductions in California?
A: You are not required to use a tax planning attorney when claiming deductions, but hiring one can save you time and money. An experienced tax planning lawyer can know what expenses to claim, how they affect your taxable income, and document it all to avoid future problems. Someone with detailed knowledge of California tax law can focus on deductibles so you can spend your energy on other key aspects of your business.
Q: What Business Expenses Are Not Deductible in California?
A: The business expenses that are not deductible in California are not integral to normal operations. One example that cannot be deducted is taking a client out to a sporting event. While you may discuss business at the game, the cost was not vital to a deal. Another example is a parking ticket. You may receive a ticket while working, but it does not make it an ordinary or required expense.
Meet With a Tax Planning Attorney Today
At Fishman, Larsen & Callister, we know how confusing both managing a company and navigating tax code can be. We can find the money you may be able to save so you can focus on other business concerns.
Contact us today for an initial consultation where we can learn the details of your business and begin providing tax solutions. You may also visit our Fresno office, located on North Fresno Street in Woodward Center, a block north of Herndon Avenue.