 Internal Revenue Service IRS tax news for National Small Business Week. Hey, why are they always calling us small in that disparaging kind of way? We may be small, but we're businesses too. When the iris pricks us, do we not bleed money? Those pricks. When the iris poisons us, do we not die? When you wrong us by disparagingly calling us small while simultaneously taking our even smaller pocketbooks, shall we not revenge? Sorry, I got a little dramatic there. It's passed now. In any case, for National Small Business Week, plan now to take advantage of tax benefits for 2022, enhanced deduction for business meals, home office deduction, and more. IR 2022-100, May 3, 2022, Washington. The Internal Revenue Service today urged business taxpayers to begin planning now to take advantage of the enhanced 100% deduction for small business meals and other tax benefits available to them when they file their 2022 federal income tax return. So we're thinking about 2022. We're no longer thinking about trying to file 2021. Here, we're going to be filing 2022 by April 15 of 2023 just to get our mindset in the proper location time-wise. During National Small Business Week, there's a link to that here. May 1, 2007, the IRS highlighting tax benefit and resources tied to the theme for this year's celebration, building a better America through entrepreneurship. With next year's filing deadline nearly a year away, any entrepreneur still has time to identify possible tax benefits, take action to qualify for them, and then claim them when they file in 2023. Enhanced business meal deduction for 2021 and 2022 only. Currently, businesses can generally deduct the full cost of business-related food and beverages purchased from a restaurant. That's kind of nice. Otherwise, the limit is usually 50% of the cost of the meal. To qualify for a higher limit, the business owner or an employee of the business must be present when food or beverages are provided. Moreover, the expense cannot be lavish or extravagant. What? That's just how I roll. Lavagant and extravagant. I don't even know what that's kind of a subjective term in the first place, but whatever, restaurants include businesses that prepare and sell food or beverages to retail customers for immediate on-premises or off-premises consumption. For this purpose, grocery stores, convenience stores, and other businesses that primarily sell pre-packaged goods, not for immediate consumption, do not qualify as restaurants. You've got to then get into the weeds here in terms of what's going to be the deductible items and make sure that you're recording that and doing that, of course, properly, because this is an area where you could imagine there could be abuse. And if there was abuse in it, then the IRS at some point will probably try to kind of tap down on that. And then the pendulum will swing back and forth, and here we go. So additionally, an employer may not treat certain employer-operated eating facilities as restaurants, even if they are operated under contract by a third party. For more information about this provision, as well as details on the special record-keeping rules that apply to business meals, CIRS publication 463 Travel Gift and Car Expenses, home office deduction. With a growing number of business owners now working from home, many may qualify for the home office deduction. That's nice. That's a big one. Also known as the deduction for business use of a home. Usually, a business owner must use a room or other identifiable portion of the home exclusively for business on a regular basis. Exceptions to the exclusive use standard apply to home-based daycare facilities and portions of the home used for business storage. So if you're using the home for those kind of purposes, a daycare center or storage, then make sure that you're diving deeper into this because you might, at first glance, think that you don't qualify, but they got some expanded rules for that kind of thing. Because obviously, if you have a daycare center, the kids are... You're not going to restrict the kids to like a little business corner of the place. They're going to roam the whole castle most likely or something like that. So I think that's my interpretation of why there might be different rules, although I'm not an expert on that, but that's the general kind of idea. So where the home is only fixed location for that business. Okay, those eligible can figure the deduction using either the regular method or the simplified method. So there's two methods to be used here. Obviously, they kind of put the simplified method in with the assumption that it's going to be simple or easier, but clearly what actually happens in reality is that you end up thinking that you need to calculate it both ways to determine which one is going to be most beneficial for you. So that's typically what has to happen kind of in practice, right? You're going to do it both ways and see which one is best if you're going to do the actual method. You can imagine that you're going to take the home office kind of percentage of your place here, whether that be a room or whatever place that you've designated and compare possibly the square footage of it to the whole place. And then you can imagine using that ratio. That would be the general idea. So it's not too bad to do that. It's not too difficult to do that for the full method. To those who choose the regular method, fill out and attach form 8, 8, 2, 9 expense for business use of home. There's a link to that here. In general, this form divides the expenses of operating the home between personal and business use. So you're going to use typically some kind of percentage that will apply those things out that are going to be used, that are kind of in the house in general, that you can apply out and so on using that kind of thing. So direct business expenses are fully deductible. So if it's directly for the business, like you painted the office itself, then you don't really have to apply it to the personal side because that was the business, you painted the business office. But if you painted the outside of the house or something, then maybe it'd be different, right? You'd have to kind of allocate it possibly. On the other hand, the business portion of indirect expenses such as real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation maintenance, repairs is figured on this form based on the percentage of the home used for business. Alternatively, instead of filling out the 44-line form 8-8-2-9 business owner can choose the simplified method based on a six-line worksheet found in the instructions to Schedule C. So there's a link to the Schedule C instructions if you want to dive into that more depth. The tax form for the sole proprietors, that's what the Schedule C is. This method has a prescribed rate of $5 a square foot for business use of the home. So again, $5, it's probably could work out to be more beneficial maybe in moderate price locations. But if you're talking about high priced areas, then the square footage method may be higher because the cost of living is going to be higher. So if you're in a high cost of living area, you probably are going to end up wanting to use the more difficult method or the non-simple method. The maximum deduction is $1,500 based on business use of at least 300 square feet, though home of at least 300. So though homeowners choosing the simple option cannot depreciate the portion of their home used for business, they can still claim allowable home mortgage interest, real estate taxes, casualty losses as itemized deductions on Schedule A. So if you own the home, then you got this depreciation component, which could be a significant component, but it's also kind of confusing to do, and it also kind of messes with your basis in the property. So for when you sell it and whatnot, which might not be a big problem because you'll have an exemption maybe or something like that in any case, but it gets a little bit more confusing. And that's one of the things that the simplified method would be more simple to do, but possibly would not be as large of a deduction, especially if you're in a high cost of living area. So these deductions need not be allocated between personal and business use as is required under the regular method. Business expenses unrelated to the home, such as advertising, supplies, wages paid to employees are still fully deductible. Under both the regular and simplified methods, business expenses in excess of the growth income limitation are not deductible. For more information about this limit, along with other details on the home office deduction of both methods for figuring it, you can see publication 587, Business Use of Your Home. There's a link to that here. Other tax benefits from business startup expenses to the qualified business income deduction to health insurance deduction for self-employed individuals. There are a variety of other tax benefits that are often available to entrepreneurs and other business owners. For details on these and other benefits, you can see publication 535, Business Expenses. There's a link to that here. Details on other major expense for other business depreciation of building equipment. Other assets can be found in publication 946, How to Depreciate Property. There's a link to that here. Yet another worthwhile resource for any small business. You're small. You're corrupt. You're small. Our taxes pay your salary on my small business. For any other small business, it's the agency's tax guide for the small business publication 334. There's a link to that here. All these publications are available on irs.gov, irs.gov, irs.gov. Be for victory over tax questions because you're not going to get a victory over tax questions by calling the IRS because they probably aren't going to answer because they have phone problems. So you've got to go to the irs.gov. There's a link to all this wonderful stuff here and there'll be a link to this in the description.