April 26, 2018

Prepare your Tax Appointment

Advertising & promotion

Overview

Advertising activities include most of the things you do to get the word out about your business or draw attention to a product or sale.

Criteria

  • Ordinary and necessary: An expense is ordinary if it’s common to your profession. A necessary expense is one that’s appropriate or helpful in developing or maintaining your business.
  • Current expense: will benefit your business for less than one year
  • Directly related to your business: not personal
  • Reasonable in amount: reasonableness is dependent on the circumstances and not limited to a specific dollar amount

What is deductible

  • Business cards
  • Mailing lists / mailing list software
  • Brochures
  • Branded giveaway items
  • Posters
  • Web site design, development and maintenance
  • Goodwill advertising: brand building that fosters a positive image for your business
    • Ex: sponsoring a little-league team
    • Case: The tax court allowed a gas station owner to deduct the cost of providing free beer to customers as a good-will advertising expense since it improved business.

What to collect

  • Name of vendor
  • Date
  • Amount of expense
  • What you used to pay for the expense
  • Enter all of this information into your Expense Tracking System

Gotchas

  • Personal expenses, even if they might help your business are not deductible. For example, expenses related to inviting customers to your daughter’s wedding are not deductible.
  • Advertising to influence government legislation is not deductible
  • Do not deduct time and labor

Tip: Make sure you can show a clear connection between the advertising activity and your business.

Bad debts

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Never deductible
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