What is a write-off? And what can I write-off?

If you ask the general question what is a write-off you may receive what I consider an incomplete answer.  You often hear categories:  office supplies, auto expense, insurance, supplies etc.  If giving that answer I might hand you IRS form schedule C, which list all kinds of categories of expenses.

Two important words exist in the IRS definition of an expense.  They are ordinary and necessary.  Your expense must be necessary to your business and be of ordinary kind and amount.

With that information I have developed a five-word definition:  Is That What Really Happened.  If you are in the course of life being an entrepreneur and spend money that does or can produce income it may be a write off.

Ex.  A man and his fiancé drive 1500 miles in 2007 to get married.  They are meeting with the minister to pick out vows.  The minister tells the man an accountant about his first new home that he had purchased that year.  The accountant hearing those words asked if he had received the first time home buyer credit available that year.  No?  You need to send you taxes back with me and I will amend them to get you the proper credit.

The man in this example drove 1500 miles stayed a week and drove home.  He did amend the return.  Could part of that trip be a write off?  Yes.  How much?  I would say a small portion.  I am all for taking write-off’s but don’t be stupid.  We still have to be able to defend the story and the expenses.

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