The mysterious “other.”

Some tax deductions are not mentioned by name on a tax form but can still be quite valuable to a

The mysterious “other.”

Some tax deductions are not mentioned by name on a tax form but can still be quite valuable to a taxpayer. If you own a trade or business, you can deduct a number of expenses under the broad category of “other.”

In general, taxpayers may deduct ordinary and necessary expenses incurred in the conducting of a trade or business. An ordinary expense is common and accepted in the taxpayer’s trade or business. A necessary expense is appropriate for the business.

Although many common expenses are deducted on designated lines of the tax schedule, some expenses may not fit into a particular category. Taxpayers can deduct these as “other” expenses. A breakdown of “other” expenses must be listed on line 48 of Form 1040 Schedule C. The total is then entered on line 27.

Examples of “other” expenses include:

Amortization of certain costs, such as pollution-control facilities, research and experimentation, and intangibles including goodwill.

Bad debts. Business bad debts must be directly related to sales or services provided by the business, must have been previously included in income and must be worthless (non-recoverable). If a taxpayer deducts a bad debt expense and later recovers it, the amount must be included in income in the year collected.

Business start-up costs. These are costs related to creating an active trade or business, or investigating the creation or acquisition of an active trade or business. Generally these costs are amortized. However, taxpayers who started a business in 2006 may elect to deduct up to $5,000 of certain start up costs, subject to limitations. Refer to chapter 7 of Publication 535, Business Expenses, for more information.

Gulf Opportunity (GO) Zone clean-up costs. Fifty percent of qualified clean-up costs for the removal of debris from, or the demolition of structures on, real property located in the GO Zone which are paid or incurred in 2006 are deductible as “other” expenses. The property must be held for use in a trade or business, for the production of income, or as inventory.

Personal, living and family expenses, do not qualify as deductible “other” business expenses.

Beginning in 2008, small tax-exempt organizations that were previously not required to file a return may be required to file an annual electronic notice. The notice is Form 990-N, Electronic Notice (e-Postcard) for Tax Exempt Organizations Not Required to File Form 990

Beginning in 2008, small tax-exempt organizations that were previously not required to file a return may be required to file an annual electronic notice. The notice is Form 990-N, Electronic Notice (e-Postcard) for Tax Exempt Organizations Not Required to File Form 990 or 990-EZ, and the new filing requirement applies to tax years beginning after December 31, 2006.

The electronic notice (or e-Postcard) is a provision of the Pension Protection Act of 2006 and applies to small tax-exempt organizations – organizations not required to file Form 990 or 990-EZ because their gross receipts are normally $25,000 or less. Not all small tax-exempt organizations will have to file the e-Postcard. Some exceptions are organizations included in a group return and private foundations required to file Form 990-PF. Also, the e-Postcard requirement does not apply to churches, their integrated auxiliaries, and conventions or associations of churches.

The Internal Revenue Service started mailing letters to small tax-exempt organizations in July 2007. The letters notify these organizations of their potential requirement to file the e-Postcard. IRS is developing an electronic filing system for the e-Postcard and will publicize filing procedures when the system is completed and ready for use. There will not be a paper Form 990-N.

It’s very important that organizations required to file the e-Postcard do so each year or they risk losing their tax-exempt status. The Pension Protection Act requires the IRS to revoke the tax-exempt status of any organization that does not meet its annual filing requirement for three consecutive years.

If you would like more information on the e-Postcard, including notification of when the filing system is ready, sign up for Exempt Organization’s EO Update, an e-mail newsletter that highlights new issues and activities affecting exempt organizations. To subscribe, go to www.irs.gov/eo and click on “EO Newsletter.” Information on tax-exempt organizations, including the e-Postcard, can be found on the IRS Web site at IRS.gov.

Small businesses, payroll companies, and tax professionals can get helpful tax information from monthly phone forums (conference calls) sponsored by the Internal Revenue Service. These phone forums are free and convenient – you can call in from the comfort of your home

Small businesses, payroll companies, and tax professionals can get helpful tax information from monthly phone forums (conference calls) sponsored by the Internal Revenue Service. These phone forums are free and convenient – you can call in from the comfort of your home or office.

The monthly phone forums discuss topics of interest to businesses. Some of the previous issues covered are powers-of-attorney, energy credits, electronic IRS for businesses, Form 1099 and the telephone excise tax refund. A future topic will be identity theft prevention.

The next phone forum will be held on August 15, 2007, and the topic will be “Payroll and Foreign Workers.” 

Registration for the phone forums is easy and early registration is encouraged. Phone lines are limited and slots are provided on a first-come, first-served basis. There is no registration or participation fee. Just follow the directions provided on the IRS Web site. Once you register, you will receive the call-in phone number and instructions needed to participate in the phone forum.

Additional information on the upcoming phone forum and future forums can be found on the Business page of the IRS Web site at IRS.gov. In the Search field, type in key words “phone forums” and select the link titled “Small Business Tax Workshops and Phone Forums.”  While you are visiting the Web site check out the numerous resources for small businesses that are also found at IRS.gov. 

Are you running a small business?  Would you like a calendar packed with valuable business tax information?  The IRS is offering a free calendar to help you keep track of tax deadlines and important dates throughout the year.  

You might be surprised to learn that the IRS publishes a

Are you running a small business?  Would you like a calendar packed with valuable business tax information?  The IRS is offering a free calendar to help you keep track of tax deadlines and important dates throughout the year.  

You might be surprised to learn that the IRS publishes a calendar, but like our popular Web site, IRS.gov, the calendar is part of our many services to help owners and operators of small businesses. 

The Tax Calendar for Small Businesses and Self-Employed Individuals from the Internal Revenue Service is a 12-month calendar is filled with deadline reminders, important information such as changes in deductible mileage rates and business tips such as how to organize business and travel expenses.  

This widely-used special business tax calendar provides the small business owner with a ready resource for meeting his or her tax obligations. 

Each page of the calendar highlights different tax issues and tips such as business planning, accounting methods, tracking your records, and protecting your information that are especially relevant to small-business owners.  The calendar has room each month to add notes, state tax dates or business appointments. 

Topics include information on general business taxes, IRS and Social Security Administration customer assistance, electronic filing and paying options, retirement plans, business publications and forms, common tax filing dates, federal holidays and much more.

To many citizens, running a successful business is part of the American dream.  But while they may be experts in their chosen field, few small business owners are tax experts. From starting a new business to operating or even closing a business,

To many citizens, running a successful business is part of the American dream.  But while they may be experts in their chosen field, few small business owners are tax experts. From starting a new business to operating or even closing a business, the IRS has tax advice for small business owners.  

The IRS Web site at IRS.gov has information devoted to the needs and interests of small business owners.  Topics on the Web site answer many of the nuts and bolts questions that new or even experienced small business owners might have. 

Many business decisions have significant tax implications.  The structure and accounting methods you choose can dramatically affect how much tax you pay.  Even before you check with your accountant or tax advisor, you can check out the IRS Web site for useful information.

For example, do you know whether your activities are considered hobbies or a business for tax purposes?  Who must you inform that you are starting a new business?  What structure is best for your business and what records do you need to keep?  What does it mean to select an accounting method?  All of these topics, plus a handy checklist for starting a business, are found in the section entitled “Starting a Business.”

Even businesses that have been operating for a long time encounter new and unusual tax situations.  How do you change the name of your business?  What do you need to know when your business grows and you hire employees?  The money may be rolling in but what is taxable income and what may not be taxable?  Speaking of taxes, just what forms do you need to file and more importantly when do you need to make payments?  The answers to these and more than a half-dozen other questions are found in the section entitled “Operating a Business.”

When the time comes to close your business you will want to make sure that it is done properly.  For some the closure of a small business may mean creating a different business structure.  For others it will mean selling the business.  Unfortunately for some it will mean filing for bankruptcy.  The section entitled “Closing a Business” includes a handy checklist to make certain you do not leave any loose threads.  

No matter what stage your business is in, you will find the tax help you need at IRS.gov in the tab marked Small Business/Self-Employed – Starting, Operating Or Closing a Business – on IRS.gov.  Help is also available for business owners who don’t have access to the Internet by calling 1-800-829-3676 and requesting Publication 4591, Small Business Federal Tax Responsibilities; Publication 334, Tax Guide for Small Business; and Publication 1066C, A Virtual Small Business Tax Workshop DVD.