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J.K. Lasser's Guide to Self-Employment: Taxes, Tips, and Money-Saving Strategies for Schedule C Filers by Barbara Weltman

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CHAPTER 5

Writing Off T&E Expenses

Almost every self-employed person has travel and entertainment costs related to his or her business. The costs may be taking a customer to lunch, giving a gift to a vendor on the birth of her child, or using a personal car for business travel. All of these and other similar costs are referred to collectively as T&E expenses. However, the tax rules are very strict when it comes to deductions for such expenses. The reason for restrictions: The government believes there is considerable room for abuse here, with personal outlays incorrectly treated too often as deductible business costs.

When it comes to T&E expenses, you have two layers of complexity. First, you have to understand the deduction rules, which for certain expenses may include limitations on how much can be written off. Second, you have to follow cumbersome recordkeeping rules. The failure to do so may cause you to lose legitimate write-offs. As a general rule, you're supposed to keep records contemporaneous with the expense, which means at or near the time you have the expense. This is a tax rule that makes sense because it's often difficult if not impossible to remember particulars long after an event.

What types of T&E expenses are deductible? What limits apply? And what strategies can you use to help with recordkeeping and containing ...

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