It’s important for the self-employed to know the rules. Businesses must report all earned income and expenses. There are cases where businesses claim items that aren’t actually legitimately deductible.
“They think that their personal cellphone that they may use for a few business calls, their home internet, their only car which they claim 100 percent for business, and other personal expenses can be business deductions,” said Abby Eisenkraft, an enrolled agent and CEO of Choice Tax Solutions Inc. in New York.
Not only does that cause a problem if they’re audited by the IRS, it could also hurt their cause when it comes to a sale, qualifying for a loan or making a retirement contribution based on taxable income, she said.
However, there are times where it makes sense to defer making purchases, and be a spendthrift in any given year.
Consider the following circumstances: