Archives for Tax Return

It’s Not Too Early to Organize for Your Tax Returns

We are entering the holiday season – Thanksgiving, Christmas, and New Year’s.  Homes will be busy with holiday shopping, entertaining family and friends, and lots of holiday decorations.  Before you know it, it will be time to file your 2017 taxes.

Take a few moments now to collect the tax-related paperwork that reflect the special events that happened in your life this year, and put it safely away for January.

Here are some events to consider, and some items to collect now:

  • Did you buy or sell a home? A copy of your mortgage and closing documents
  • Did you have any casualty, theft or loss? A copy of all paperwork relating to the event
  • Did you get married? Social security cards
  • Did you get divorced or separated? A copy of the divorce decree or separation agreement, showing child support, alimony, and property settlement arrangements
  • Did you have any medical expenses? A copy of ALL unreimbursed receipts from any medical provider, pharmacy, and insurance provider
  • Did you move? Old and new address, and receipts for ALL expenses related to the move
  • Did you have a baby? Date of Birth, and Social Security Number (if you have one)
  • Did you start a new job? Receipts related to a new job search, or anything related to you getting the new job.
  • Did you or someone in your family attend school (beyond high school)? Receipts for all school related expenses including tuition, room and board, books, and other items
  • Did you start a new business? This list is VERY long.  I recommend you visit our website and review the July 2017 Client Newsletter, which lists much of the paperwork needed to record new business expenses.
  • Did you donate to a charity/non-profit/religious organization? A copy of your receipt is needed.
  • Did you pay for daycare? You will need either the name and SSN of the person (if an individual), or the name, address, and EIN or the business or organization
  • Did you pay Personal Property Tax? A copy of the receipt
  • A copy of your 2016 Federal and State tax returns should be kept with your 2017 paperwork.
  • A copy of ANY other paperwork you feel is important, or you have questions about (“I wonder if this is deductible?”). It is far better to have a copy of an item you have a question about, than to later learn you need it but can’t find it.

A simple filing system to keep everything organized is to file:

  • Family (birth/marriage/divorce/daycare)
  • Home (sale/purchase/casualty/theft/loss)
  • Moving or job related
  • Medical
  • Business
  • Other/Miscellaneous

My BEST recommendation is – keep ALL of your receipts.  As you can see from the brief list above, many normal events in your life have a tax implication.  If you have a question about an expense, keep a receipt, and ask us when we prepare your tax returns.rns.

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Summer Camp Costs and the Child and Dependent Care Tax Credit


Many parents send their children to summer day camps while they work or look for work. The IRS urges those who do to save their paperwork for the Child and Dependent Care Tax Credit. Eligible taxpayers may be able claim it on their taxes in 2018 if they paid for day camp or for someone to care for a child, dependent or spouse during 2017.

Here are a few key facts to know about this credit:

Qualifying Person
The care must have been for “qualifying persons.” A qualifying person can be a child under age 13. A qualifying person can also be a spouse or dependent who lived with the taxpayer for more than half the year and is physically or mentally incapable of self-care.

Work-Related Expenses
The care must have been necessary so the taxpayer could work or look for work. For those who are married, the care also must have been necessary so a spouse could work or look for work. This rule does not apply if the spouse was disabled or a full-time student.

Earned Income
The taxpayer — and their spouse if married filing jointly — must have earned income for the tax year. Special rules apply to a spouse who is a student or disabled.

Credit Percentage/Expense Limits
The credit is worth between 20 and 35 percent of allowable expenses. The percentage depends on the income amount. Allowable expenses are limited to $3,000 for care of one qualifying person. The limit is $6,000 if the taxpayer paid for the care of two or more.

Care Provider Information
The name, address and taxpayer identification number of the care provider must be included on the return. The childcare provider cannot be the taxpayer’s spouse, dependent or the child’s parent.

Dependent Care Benefits
If you receive dependent care benefits from your employer, special rules apply.  You can send us an email with your questions, or review IRS Form 2441, Child and Dependent Care Expenses for more information on the rules.

Special Circumstances
Since every family is different, the IRS has a series of exceptions to the rules in the qualification process. These exceptions allow a greater number of families to take advantage of the credit. For more information, send us an email or see IRS Publication 503, Child and Dependent Care Expenses.

Even if the childcare provider is a sitter in the home, taxpayers may qualify for the credit. Taxpayers who pay someone to come to their home and care for their dependent or spouse may be a household employer. They may have to withhold and pay Social Security and Medicare tax and pay federal unemployment tax.  If you feel that this might apply to you, contact our office.

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Education Credits

Are you or your dependents attending a college or university?  If so, you may be able to claim an education credit on your return.

An education credit helps with the cost of higher education by reducing the amount of tax owed on your tax return. If the credit reduces your tax to less than zero, you may get a refund. There are two education credits available: The American Opportunity Tax Credit and The Lifetime Learning Credit.

Who can claim an education credit?

  • There are additional rules for each credit, but you must meet all three of the following for both:
  • You, your dependent or a third party pays qualified education expenses for higher education.
  • An eligible student must be enrolled at an eligible educational institution.
  • The eligible student is yourself, your spouse or a dependent you list on your tax return.

Who cannot claim an education credit?

  • Someone else, such as your parents, list you as a dependent on their tax return
  • Your filing status is married filing separately
  • You already claimed or deducted another higher education benefit using the same student or same expenses.
  • You (or your spouse) were a non-resident alien for any part of the year and did not choose to be treated as a resident alien for tax purposes.

American Opportunity Tax Credit

The American opportunity tax credit (AOTC) is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. You can get a maximum annual credit of $2,500 per eligible student.

The amount of the credit is 100 percent of the first $2,000 of qualified education expenses you paid for each eligible student and 25 percent of the next $2,000 of qualified education expenses you paid for that student. But, if the credit pays your tax down to zero, you can have 40 percent of the remaining amount of the credit (up to $1,000) refunded to you.

To be eligible for AOTC, the student must:

  • Be pursuing a degree or other recognized education credential
  • Be enrolled at least half time for at least one academic period beginning in the tax year
  • Not have finished the first four years of higher education at the beginning of the tax year
  • Not have claimed the AOTC or the former Hope credit for more than four tax years
  • Not have a felony drug conviction at the end of the tax year

Lifetime Learning Credit

The Lifetime Learning Credit (LLC) is for qualified tuition and related expenses paid for eligible students enrolled in an eligible educational institution. This credit can help pay for undergraduate, graduate and professional degree courses–including courses to acquire or improve job skills. There is no limit on the number of years you can claim the credit. It is worth up to $2,000 per tax return.

To claim a LLC, you must meet all three of the following:

  • You, your dependent or a third party pay qualified education expenses for higher education
  • You, your dependent or a third party pay the education expenses for an eligible student enrolled at an eligible educational institution
  • The eligible student is yourself, your spouse or a dependent you listed on your tax return

There are a few more rules and limitations on these credits.  If you believe you will be eligible for either of these credits, please let us know when we start your return.

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Pet Deductions

Most people treat their pets a lot like children.  You feed them, provide them a safe place to live, teach them skills (sit, stay), bring them to the doctor when they are sick or for a checkup, play with them, and show them love.  They are part of your family.

Can you or someone you know deduct these and other pet-related expenses?  Like most tax deductions, it depends.  Let’s look at some situations:

Service Animals / Guide Dogs

If you require the assistance of a service animal (these include assistance animals for the blind, hearing impaired, mobility impaired, and therapy animals), expenses related to the animal could be considered medical expenses.

You will need a prescription from a doctor showing your medical necessity before you obtain the animal, and keep all documentation that shows the animal was trained and certified as a treatment for your specific medical illness or condition.  Then, keep records of all expenses that relate to the animal.  These could include training, veterinary care, grooming, food, and other reasonable expenses.

Guard Dogs

If your dog is used to guard and protect your business location, it might be a legitimate business expense.   It would have to make sense (to the IRS) for a dog to be used in this fashion.  For example, a dog guarding a junkyard, a warehouse, or a small retail store after hours would make sense.  A dog guarding your home office – probably not.

Also, the size and breed of dog is important to help prove the dog being a legitimate guard dog.  German Shepherds, Rottweilers, Bull Mastiffs, and Dobermans could all normally considered ‘guard dogs’.   Your Teacup Poodle, Yorkie, or Chihuahua won’t be very convincing to the IRS inspector.

Think of the dog like any other business asset – you must keep track of all expenses and hours worked.  Food, training, and veterinary bills can all be deductible.

Barn Cats / Pest Control Cats / Feral Cats

Instead of keeping out criminals, maybe your goal is to keep your barn / warehouse / lot / junkyard free of mice and rats.  This could be either cats you own or feral cats you attract by leaving out food.   You may be able to deduct food and veterinary bills for these pest control professionals.

Like the guard dog example, you have to show a reasonable business use, and document your expenses.

Show Animals / Hobby Income

Do you have a ‘show dog’ or ‘show cat’?  Do you enter your dog or cat in shows to earn money?  If so, the prizes and other income you earn from these shows could be considered hobby income.  You may be able to deduct food, training, veterinary, show fees, travel, and even lodging expenses up to the amount of your winnings.   Detailed records are the key for any hobby income and deduction, and show animals are no exception.

Foster Parents

If you provide a foster home for animals from a qualified nonprofit organization, your expenses related to the foster care may be deductible.   You can’t deduct expenses that are provided or reimbursed by the organization (most organizations provide food, litter, and medical care for the animals).  However, any other expense that is not reimbursed (like mileage to/from the organization) may be considered a tax-deductible charitable contribution.

Moving Expenses

If you have to move due to work, you may be able to deduct some of the moving expenses.  Moving your personal belongings, vehicle, boat, lodging on the way to the new home are all valid expenses.  So are expenses related to moving your pets.  This could include a pet carrier for the trip, or the cost of shipping your pets separately from the rest of the family.

If you think one of these deductions may apply to you, contact us to discuss your pets and what documentation you might need.  This will save valuable time when we prepare your tax return.

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Often Overlooked Deductions for the New Business Owner

When starting your new business, you are probably not thinking about your tax return at the end of the year.  You have a whirlwind of activity and things to focus on – getting proper licenses, setting up a business location, getting supplies and equipment, growing your client list, hiring employees, and so many other things.

When I sit down with a new business client, we discuss all the things they had to do to get their business started, because most of them are items that are deductible at the end of the year.

Here is an exercise you can do to improve the deductions you can claim at the end of the year.  All you need is a notebook, a large manila envelope, a cup of coffee, and about an hour of quiet, undisturbed time.  If your business is a partnership (husband and wife, or two friends), it would be helpful for you to do this together.

Just answer the following questions:

  1. Do you have a home office? This is a space dedicated only for the use of your business, the main place where you work on your business.
    • Write down the total square footage of your home, and the total square footage of your office.
    • Look around the office and list EVERYTHING you had to purchase to start your business. Desks, computers, a copier, office supplies, a new phone line, Internet connection, security system, etc.
    • Did you have to do anything to your home office room to get it ready for business? Did you paint, install shelves, put in a new carpet or light fixtures?
    • Do you regularly meet clients at your home office?
    • Compile a list of ALL home expenses. This could include mortgage payments, property taxes, natural gas, electric, telephone, Internet, water/sewer, parking (if you have to pay for parking), landscaping/lawn care, homeowner association fees, as well as any and all repairs to the home.
  2. Do you have a business location outside the home? In other words, do you run your business from a commercial building?  This could be anything from a retail space in a shopping mall, to a rented office, to a storage unit.  If so, answer the questions above, but for your commercial location.
  3. Did you use any of your personal assets for the business? One example of this is a computer purchased for your personal use at home, but you now use it for the business. Another example would be a personally purchased pressure washer, lawn mower, or other tools that you now use for the business.  If so, write down when you purchased them, the cost, and their approximate value the day you started using them for the business.
  4. Do you sometimes go to Office Max or Staples to get something for your business, and pay for it with your personal funds? Record these purchases, and keep track of the receipts.
  5. Do you use a vehicle for your business? This could be your own vehicle, or a vehicle used only for the business.  If so, you need to track mileage.  You basically have two options:
    • Keep a notebook in the vehicle, and write down your mileage and the purpose for each trip
    • Use a mileage tracking app like MileIQ to automatically track your mileage. I strongly recommend using a mileage tracking app to make this simple.
  6. Do you use your personal money to:
    • Take clients out to lunch?
    • Pay for a company holiday party or barbecue?Keep the receipts – these expenses may be deductible.
  7. Do you pay self-employed health insurance? You may be able to deduct 70% of your health insurance premiums.
  8. Do you use your personal cell phone for business (this includes calls, texts, and/or Internet use)? If so, keep a copy of your phone records and highlight the business related calls/texts.
  9. Do you purchase fuel for your equipment? This includes lawn mowers and other landscaping equipment, pressure washers, carpet extraction equipment and related items?  If so, keeping your receipts might allow you to take a credit on the tax paid on fuel.  (Note: as of 2017, the credit is over 18 cents/gallon.)
  10. Did you buy any equipment? For many small businesses, this can be a large expense.  A new landscaper might need a truck (or two), a trailer (or two), a lawn mower (or several), trimmers, edgers, etc.  This is a big one, and is related to the home/business office questions.  Be sure to document every piece of equipment you purchased.  Some can be expensed; some can be depreciated.   The documentation you have may help significantly lower your tax liability.

These are only a few deductions that overlooked by new business owners.  If you have not started, I strongly suggest sitting down and writing down your answers to these questions, then give me a call.  Let us help you get your tax bill as low as possible.

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Don’t Miss Out on Miscellaneous Expense Deductions

Are you scraping the bottom of the barrel of your itemized deductions? The IRS allows you to deduct a mixture of expenses that don’t fit neatly into any other basket. They’re called, appropriately enough, “miscellaneous expenses.” But you can’t just lump these expenses together and write off the full amount on your return.

After you add up all your miscellaneous expenses, you can deduct only the excess above 2 percent of your adjusted gross income (AGI) for the year.

For instance, let’s say your annual AGI is $100,000 and you incur $1,900 of miscellaneous expenses during the year. In this case, your deduction is zero because you don’t clear the tax law threshold. On the other hand, if you have $2,500 in miscellaneous expenses, you’re entitled to deduct $500.

Which expenses are deductible? The list is a long one and it’s a hodgepodge. However, miscellaneous expenses can generally be divided into two main groups: unreimbursed employee business expenses and production-of-income expenses.

  1. Unreimbursed employee business expenses.
    These are job-related expenses that you pay out of your own pocket. Some common examples are as follows:
  • Cellphones and home computers when required as a condition of employment.
  • Dues for a professional organization.
  • Education related to employment.
  • Home-office expenses (subject to business-use limits).
  • Licenses and regulatory fees.
  • Malpractice insurance premiums.
  • Subscriptions to professional journals and magazines.
  • Travel and entertainment for your business (limited to 50 percent for meals).
  • Union dues.
  • Work clothes or uniforms.

You can also deduct the cost of seeking employment – for example, printing out resumes and fees for an employment agency – whether or not you actually get a job.

  1. Production-of-income expenses. This category covers the cost of various investment, financial, and tax services. It includes the following common examples:
  • Accounting fees.
  • Appraisal fees for charitable donations of property and casualties.
  • Custodial fees for IRAs.
  • Investment and financial planning fees.
  • Legal fees.
  • Safe deposit rentals for storing non-tax-exempt securities.
  • Subscriptions to financial planning magazines and journals.
  • Tax assistance fees.

The cost of having your tax return prepared, as well as obtaining professional advice relating to tax matters, both count as miscellaneous expenses.

It’s easy for some of these random expenses to fall through the cracks. You are advised to scour your records – and check things twice – before your return is filed. Just one or two extra items could put you over the 2 percent-of-AGI threshold or increase an existing deduction.

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Nationwide Tax Preparation Rates

How Much Should You Expect To Pay For Tax Return Preparation?

(Note: Fees charged by Hampton Roads Accounting are about HALF the national average!)

Taxpayers looking to hire a professional to complete their tax return can expect to pay an average of $273 for an itemized Form 1040 with Schedule A and a state tax return, according to the National Society of Accountants (NSA). This is a 4.6 percent increase over the average fee last year, which was $261. It is an 11 percent increase from two years ago – the last time the survey was conducted.

The average cost to prepare a Form 1040 and state return without itemized deductions is $159, also a 4.6 percent increase over the average fee last year, which was $152. It is an 11.2 percent increase from two years ago.

“When you consider the time it takes to complete tax returns, this is a very strong value,” says NSA Executive Vice President John Ams. “The tax code continues to become more complex each year, including some new Affordable Care Act reporting requirements. Professional tax preparers may also be able to find tax deductions and credits that may taxpayers might not notice.”

The survey also reported the average fees for preparing additional Internal Revenue Service (IRS) tax forms, including:

  • $174 for a Form 1040 Schedule C (business)
  • $634 for a Form 1065 (partnership)
  • $817 for a Form 1120 (corporation)
  • $778 for a Form 1120S (S corporation)
  • $457 for a Form 1041 (fiduciary)
  • $688 for a Form 990 (tax exempt)
  • $68 for a Form 940 (Federal unemployment)
  • $115 for Schedule D (gains and losses)
  • $126 for Schedule E (rental)
  • $158 for Schedule F (farm)

Save some money, visit our Tax Preparation page today and get started!


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Avoiding Penalties When Filing Your Federal Income Tax Return

Hampton Roads Accounting always recommends using a tax return professional when filing your income tax return. Aside from the convenience to you, a tax professional is trained to help you legally pay as little tax as possible.

If you choose to prepare your own taxes, the information in this article will help you avoid penalties when filing your tax return.

The Internal Revenue Code imposes many different kinds of penalties, ranging from civil fines to imprisonment for criminal tax evasion.

If you do not file your return and pay your tax by the due date, you may have to pay a penalty. You may also have to pay a penalty if you substantially understate your tax, understate a reportable transaction, file an erroneous claim for refund or credit, or file a frivolous tax submission. If you provide fraudulent information on your return, you may have to pay a civil fraud penalty.

Penalties are generally payable upon notice and demand. Penalties are generally assessed, collected and paid in the same manner as taxes. The IRS notice you receive will contain the name of the penalty, the applicable code section, and how the penalty was computed (or information on how to obtain the computation if not included).

Estimated Tax-Related Penalties

Employees have taxes withheld from their paychecks by their employer. When you have income that is not subject to withholding you may have to make estimated tax payments during the year.

This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes, and awards. You also may have to pay estimated tax if the amount being withheld from your salary, pension, or other income is not enough to pay your tax liability.

Estimated tax payments are used to pay income tax and self-employment tax, as well as other taxes and amounts reported on your tax return. If you do not pay enough through withholding or estimated tax payments, you may have to pay a penalty. If you do not pay enough by the due date of each payment period you may be charged a penalty even if you are due a refund when you file your tax return.

Penalties for filing or paying taxes late

The most common penalties are for filing late or paying taxes late.

Filing late: If you do not file your return by the due date (including extensions), you may have to pay a failure-to-file penalty. The penalty is usually 5 percent for each month or part of a month that a return is late, but not more than 25 percent. The penalty is based on the tax not paid by the due date (without regard to extensions).
If you file your return more than 60 days after the due date, the minimum penalty is $100 or, if less, 100 percent of the tax on your return.

Paying tax late: You will have to pay a failure-to-pay penalty of ½ of 1 percent (0.5 percent) of your unpaid taxes for each month, or part of a month, after the due date that the tax is not paid. This penalty does not apply during the automatic six-month extension of time to file period if you paid at least 90 percent of your actual tax liability on or before the original due date of your return and pay the balance when you file the return.

The failure-to-pay penalty rate increases to a full 1 percent per month for any tax that remains unpaid the day after a demand for immediate payment is issued, or 10 days after notice of intent to levy certain assets is issued.

For taxpayers who filed on time, the failure-to-pay penalty rate is reduced to ¼ of 1 percent (0.25 percent) per month during any month in which the taxpayer has a valid installment agreement in force.

Combined penalties: For any month both the penalty for filing late and the penalty for paying late apply, the penalty for filing late is reduced by the penalty for paying late for that month, unless the minimum penalty for filing late is charged.

Accuracy Related Penalties

The two most common accuracy related penalties are the “substantial understatement” penalty and the “negligence or disregard of the rules or regulations” penalty. These penalties are calculated as a flat 20 percent of the net understatement of tax.

Penalty for Substantial Understatement

You understate your tax if the tax shown on your return is less than the correct tax. The understatement is substantial if it is more than the larger of 10 percent of the correct tax or $5,000 for individuals. For corporations, the understatement is considered substantial if the tax shown on your return exceeds the lesser of 10 percent (or if greater, $10,000) or $10,000,000.

You may avoid the substantial understatement penalty if you have substantial authority for your tax treatment of the item or through adequate disclosure. To avoid the substantial understatement penalty by adequate disclosure, you must properly disclose the position on the tax return and there must at least be a reasonable basis for the position.

To properly disclose the position, complete and attach IRS Form 8275 to your tax return and disclose all relevant facts. A reasonable basis is a relatively high standard of tax reporting, that is, significantly higher than not frivolous or not patently improper. The position must be more than just merely arguable or merely a colorable claim. The position must be reasonably based on authority supporting the position.

Penalty for negligence and disregard of the rules and regulations

“Negligence” includes (but is not limited to) any failure to:

  • make a reasonable attempt to comply with the internal revenue laws
  • exercise ordinary and reasonable care in preparation of a tax return or
  • keep adequate books and records or to substantiate items properly

This penalty may be asserted if you carelessly, recklessly or intentionally disregard IRS rules and regulations – by taking a position on your return with little or no effort to determine whether the position is correct or knowingly taking a position that is incorrect. You will not have to pay a negligence penalty if there was a reasonable cause for a position you took and you acted in good faith.

Civil Fraud Penalty

If there is any underpayment of tax on your return due to fraud, a penalty of 75 percent of the underpayment due to fraud will be added to your tax. The fraud penalty on a joint return does not apply to a spouse unless some part of the underpayment is due to the fraud of that spouse.

Negligence or ignorance of the law does not constitute fraud.

Typically, IRS examiners who find strong evidence of fraud will refer the case to the Internal Revenue Service Criminal Investigation Division for possible criminal prosecution. Keep in mind that both civil sanctions and criminal prosecution may be imposed.

Frivolous Tax Return Penalty

You may have to pay a penalty of $5,000 if you file a frivolous tax return or other frivolous submissions. If you jointly file a frivolous tax return with your spouse, both you and your spouse each may have to pay a penalty of $5,000. A frivolous tax return is one that does not include enough information to figure the correct tax or that contains information clearly showing that the tax you reported is substantially incorrect.
You will have to pay the penalty if you filed this kind of return or submission based on a frivolous position or a desire to delay or interfere with the administration of federal tax laws. This includes altering or striking out the preprinted language above the space provided for your signature.

This penalty is added to any other penalty provided by law.

Penalty for Bounced Checks

If you write a check to pay your taxes and the check bounces, the IRS may impose a penalty. The penalty is either 2 percent of the amount of the check – unless the check is under $1,250, in which case the penalty is the amount of the check or $25, whichever is less.

The Bottom Line

The bottom line is that you must report all your income, file your return and pay your tax by the due date to avoid interest and penalty charges.

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Tax Tips for Cleaning and Janitorial Companies

Cleaning homes, apartments, offices and other buildings can indeed be a chore, but one that can be incredibly rewarding, especially when you are paid well to do it.

The tips in this article apply to all cleaning companies and professionals, whether you provide janitorial services, commercial or residential cleaning, window cleaners, pressure/power washers, auto detailing, or any related business.  These tips are just as important (if not more so) to a one or two-person operation as they are to a company with dozens of employees.

Self-Employment Tax

If you ever worked for someone else and received a W-2, you and your employer each shared a responsibility for your taxes.  The employer withheld a portion from your paycheck, added an employer portion, and submitted them quarterly.

Most cleaning professionals are self-employed.  That means you are responsible to report and pay both the employee and employer portions of your taxes on a regular basis.  However, since you are in business, you can deduct the employer portion as a business expense.

Vehicle Expenses

Whether you use your personal vehicle for business use or have a separate vehicle just for business, you can deduct expenses related to your vehicle.  If you use your own vehicle for both personal use and for business use, you will need to track the business expenses separately.

Parking and Tolls

You can deduct fees and tolls related to your cleaning business.  If you have to pay for parking to clean an office or a home, it is a deductible expense.

Bus / Train / Other Public Transportation

If you have to travel by bus, train, taxi, or Uber/Lyft to go from job site to job site, you can deduct the cost of this transportation.  Keep all receipts.

While vehicle and transportation expenses will be a significant portion of your expenses, they aren’t the only ones you can deduct:


Newspaper ads, flyers, Facebook ads, postcards, imprinted pens, direct mail letters, and other related ways to market your business.  Even the costs of setting up a tent/booth at a local home show are deductible if you are advertising your business.  The cost of having a logo designed for your company – that’s deductible also.


Most cleaners need to have general liability insurance, which is a valid business expense.  Don’t claim vehicle insurance – that was already covered by the vehicle expenses.

Phone Service

If you have a separate phone line installed for your business, it is a valid expense.  Most people today use their cell phones for business.  If it is your personal phone, you will have to separate out the business use from personal use.

I have one client who uses her cell phone for business, and her customers communicate with her by text message.  Each month, she prints out her cell phone record and highlights the texts from her customers.  This is a great way to document actual business usage of her phone, and good records are needed to substantiate any type of deduction claimed on your tax returns.

Health Insurance

You are in business, and you need health insurance.  Your premiums may be deductible if your business makes a profit and you can’t enroll in an employer’s health plan (if you can be claimed on your spouse’s health plan, you can’t claim the deduction.)
Employer Portion of Social Security and Medicare

As noted earlier, you are responsible for both the employer and employee portions of employment taxes.  The good news is you can deduct the employer portion as a business expense.

Ordinary and Necessary Expenses

Any cleaning company has a lot of ordinary and necessary expenses to keep the operation going.  You can claim expenses for:

  • Wages you pay to employees or helpers
  • Tools
  • Machinery
  • Solvents, rags, gloves, and other supplies
  • Training and certifications you acquired

Keeping clear records is critical because it’s easy to forget small deductions over time, such as the fuel used to power your pressure washer. Keep receipts for all business-related costs to show the IRS in case you are audited.
You can deduct larger items, like a floor buffer or pressure washer, over time because it is considered a “capital purchase”. You can spread the deduction of a “capital purchase” over the number of years you expect the item to last. For example, if a floor buffer costing $1300 is expected to last five years:

  • $1300 x 20% = $260. $260 is the deduction you can claim each year for five years.

These are just a few of the many business items a new cleaning business must keep in mind.   If you need help in setting up your new business or want to discuss how you can improve your operations, please contact our office.

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Consumer Alert: New Tax Return Scams

Consumer Alert: Tax Return / Identity Theft scammers are changing tactics again.

In a previous post, I talked about how some Virginia tax refunds are being delayed because of extra precautions being taken due to identity theft.  These same criminals have targeted individuals for both federal and state returns.

Both the IRS and state tax departments are taking extra steps to verify information on tax returns to protect your identity and your refund.  Many people have heard about this through the news, but are not sure exactly what that means for them.

Criminals are taking advantage of this confusion by calling individuals, pretending to be IRS agents, and asking to verify information on their return so the return can be processed.

This January, the Treasury Inspector General for Tax Administration (TIGTA) announced they have received reports of roughly 896,000 phone scam contacts since October 2013 and have become aware of over 5,000 victims who have collectively paid over $26.5 million as a result of the scam. Just this year, the IRS has seen a 400 percent increase in phishing schemes.

The IRS will never:

  • Call to demand immediate payment over the phone, nor will the agency call about taxes owed without first having mailed you several bills.
  • Call or email you to verify your identity by asking for personal and financial information.
  • Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  • Require you to use a specific payment method for your taxes, such as a prepaid debit card.
  • Ask for credit or debit card numbers over the phone or email.
  • Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying.

If you get a phone call from someone claiming to be from the IRS and asking for money or to verify your identity, here’s what you should do:

If you don’t owe taxes, or have no reason to think that you do:

  • Do not give out any information. Hang up immediately.
  • Contact TIGTA to report the call. Use their “IRS Impersonation Scam Reporting” web page. You can also call 800-366-4484.
  • Report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on Please add “IRS Telephone Scam” in the notes.

If you know you owe, or think you may owe tax:

  • Do not give out any information. Hang up immediately.
  • Contact Hampton Roads Accounting.  We can help you get your taxes filed.
    (even if you haven’t filed for years)


Here is a short YouTube video from the IRS that discusses this problem:


As always, if you have any questions about your taxes, please contact Hampton Roads Accounting.  We are here to help you.


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Virginia Tax Refunds May Be Delayed

Have you received a “Review of Tax Return” letter from the Virginia Department of Taxation?

The Virginia Department of Taxation is sending “Review of Tax Return” letters (AUIN073A RAP Additional Review) to some taxpayers to verify withholding information. Because of the increase in identity theft and refund fraud, Virginia is taking extra precautions this year to validate the refund returns it processes.

Processing of tax returns could take longer as Virginia works to protect taxpayer information and ensure that taxpayers receive the state income tax refunds to which they are entitled.

You might be concerned if you receive a Review of Tax Return letter. Receiving the letter does not mean you are a victim of identity theft or that your return contain errors or missing data.  It just means that your return was stopped for review.

If you receive this letter, you should read it carefully to determine what action you might need to take.

Please note the following:

If you DID NOT submit an individual income tax return, you should check where indicated in the first paragraph of the letter and return it using the fax number or address provided.

If you DID file a return, you should follow the instructions in the letter and submit all requested documents as soon as possible by fax or mail.  Virginia will continue processing returns once it receives all requested documents and confirms that the returns are correct.  Once you send in the requested documents, please allow 7 business days for Virginia to receive them.

If you filed a return and already received your refund, or receive one before sending Virginia the requested information, Virginia was able to verify your returns through other means.  They no longer need documentation from you, and you may disregard the letter.

Getting a letter from the state about your tax return can be stressful, but we are here to help.  If you received a Review of Tax Return Letter, please contact Hampton Roads Accounting today for assistance or to answer any questions you may have.

Hampton Roads Accounting is happy to help you, whether we prepared your return or not.


Just go to our ‘Contact Us’ page to get started.  We will be in touch right away.

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