Is It OK to Write Off Personal Expenses?
Question: My brother-in-law owns his own business. He says he writes off most of his personal expenses in the business, and that I should do the same thing. What do you think?
Answer: I’ve heard and seen this more than a few times, and it always makes me cringe. I’m not a CPA or tax accountant, so I’m not qualified to say what specific expenses are deductible in your business, but I’ll bet every meal you eat out with friends and family and every vacation you take are not deductible for business purposes.
If you deduct a meal, entertainment event or trip, make sure you have it fully documented—who you were with and for what purpose. What business purpose did this expense serve?
Writing off “everything” seems to be waving a red flag at the IRS, daring them to conduct an audit. And if they do, you will need to prove each and every deduction. Make sure you have kept accurate and detailed documentation.
Please email accounting questions you would like considered for the column to HGatter@AccountingSupportLLC.com with the subject line of "Ask the Accountant."
Harriet Gatter, owner of Accounting Support LLC, was an ad specialty distributor for 23 years and an adjunct professor of accounting at Neumann University. She sold her ad specialty business in 2012, became certified as a QuickBooks ProAdvisor, and now works exclusively with ad specialty distributors nationwide on their QuickBooks, order management and accounting needs.