Author: Leon Clinton

Disasters such as storms, fires, floods, freezes, and hurricanes can damage or destroy vital business records.

You need accounting and tax records not only to file your taxes (including claims for casualty losses), but to file insurance claims, bill clients, pay bills, obtain loans, deal with federal and state audits, determine business cash flow and solvency, and otherwise continue in business. 

Record reconstruction after a disaster may not be as hard as you think. It’s likely that much critical tax and financial data is already backed up online in the “cloud.” For example, your accounting software may perform online backups automatically without you even being aware of it.

Of course, not everything you need will be backed up online, particularly older items. Data on damaged or destroyed computer hard drives may be recoverable by experts.

To the extent you lack online backups, you’ll have to get copies of vital records from your bank, clients and customers, landlord, insurer, and government agencies such as the IRS.

After. The IRS recommends you document a disaster loss by taking photographs or videos as soon after the disaster as possible. 

Before. Also, check mobile phones or other cameras for pictures and videos before the disaster occurred.

Be prepared for the next disaster. Back up and safely store online in the cloud your most critical data: major contracts and legal documents, tax returns and financial statements, and other critical business and customer documents.

If you have any questions or need my assistance, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• June 8, 2021

When you know the rules related to business mileage, you 

• protect yourself in the event of an IRS audit, and 
• pay less tax. 

Take Henry, for example. Before he knew the mileage rules, he deducted 30 percent of his SUV’s cost. Once he learned the rules, he deducted 92 percent. 

Or look at poor Mark—he lost almost all his vehicle deductions in an IRS audit.

Be like Henry. Here’s how.

1. Know the business mileage rules
2. Document your mileage
3. Create an administrative office for your business in your home

If you have questions about your business vehicle, please don’t hesitate to call me on my direct line at 408-778-9651.

• By Leon Clinton
• June 3, 2021

When you know the rules, you can party with your employees and deduct 100 percent of the cost. 

The IRS says that the following types of entertainment qualify for the 100 percent employee entertainment tax deduction:

• Holiday parties, annual picnics, and summer outings
• Maintaining a swimming pool, baseball diamond, bowling alley, or golf course

The IRS makes it clear that the above are examples, and that other types of entertainment may also qualify for the 100 percent entertainment deduction. The tax code states that “expenses for recreational, social, or similar activities (including facilities therefor) primarily for the benefit of employees” qualify for the 100 percent deduction.

Who Are These Employees?

Technically, the law requires that the entertainment expenses be primarily for the benefit of employees other than a “tainted group.” The tainted group consists of

• highly compensated employees (employees who are paid more than $130,000 in 2021);
• anyone, including you, who owns at least a 10 percent interest in your business (this is called a “10 percent owner”); or
• any members of the families of 10 percent owners, i.e., brothers and sisters (including half-brothers and half-sisters); spouses; ancestors (parents, grandparents, etc.); and lineal descendants (children, grandchildren, etc., including adoptees).

As the business owner, you belong to the tainted group. That’s not a big deal. You just need to make sure that partying with the employees is primarily for the benefit of the employees.

“Primary” Means “More Than 50 Percent”

In tax law, the words “primary” and “primarily” mean “more than 50 percent.” For employee recreation, that means the untainted group of employees has to account for more than 50 percent of the use of the entertainment facility, or in the case of a party, a majority of the attendees must come from the untainted employee group.

Documentation tip. You can measure “primary” by days of use, time of use, number of employees, or any other reasonable method. Regardless of how you measure use, the keys to your deductions are the records that prove the uses. 

The opportunities for employee entertainment are excellent. If you would like to discuss this further, please give me a call on my direct line at 408-778-9651.

• By Leon Clinton
• May 29, 2021