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Chapter 12. Preparing Income Tax Returns > Non-Tax-Related Transactions

Non-Tax-Related Transactions

From time to time, transactions occur in your business that have no business on your tax return. Following is a checklist of typical business transactions that you do not include as income or deductions on your tax return:

  • Penalties you pay the IRS and state revenue agencies— If you make a late tax payment, the interest portion is deductible but the penalty is not.

  • Costs of tickets for traffic violations— The cost of breaking the law is not deductible.

  • Startup costs of beginning a new business— The legal fees, corporate filing fees, research costs, market surveys, and other expenses you incur to help get your business rolling can be amortized over a period of five years but not deducted all in the year in which they were incurred.

  • Charitable contributions— Unless your business is incorporated, charitable contributions belong on a business owner's Schedule A with other itemized deductions, even if the business paid the contribution.

  • Lobbying costs— Even if lobbying results in a direct benefit to your business, the costs are not tax deductible.

  • Dues to entertainment facilities— The cost of specific entertainment events can qualify as a business deduction, but the country club dues are not deductible.

  • Appreciation in property— Assets owned by your company might increase in value over the years, but you are not taxed on that increase (at least not until you sell the assets for a profit).



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