Start-up expenses often can be deducted for tax purposes. Do you track all of your start-up expenses so you can take these deductions?

In a BLR webinar titled "Tax Savings for Small Businesses: How to Maximize Valuable Deductions and Avoid IRS Overpayments," Brian C. Greenberg, CPA, outlined how to maximize your deductions in start-up. If you don't track these, you could be losing valuable deductions on your taxes. Here are some examples:

• Vehicle and travel are the first category. The reimbursement rate for 2011 is 55.5 cents per mile (an increase from the first 6 months of 2011 due to increased gasoline prices). You need to track your auto miles. You should track your receipts from when you get the oil changed (which will help you track approximate mileage). Even tracking once per week is often sufficient for the IRS in terms of recordkeeping.
• Meals and entertainment are another deduction you can often take. You should have a log of the client you're meeting with and what the business meeting was in order to take this deduction.
• Inventory deductions are allowed as well. Inventory is a great way to manage your costs from the business owners' perspective. However, when you play the game of low valuation of your inventory, you may get a benefit the first year, but it will catch up with you. It is generally better to record at true replacement cost. Bear in mind that the replacement value may not be the same as what you paid for the product.
• Equipment-related deductions are extremely aggressive now. People have a lot of equipment, even though we are primarily a service economy, those who have equipment can write off up to $500,000 worth of equipment. It is recommended for start-ups to not take the huge write off in the first year; you can write it off over 5 years.

Talk to your accountant to do tax planning and determine the best way to handle these issues.

Brian C. Greenberg, CPA, is the founder of Brian C. Greenberg & Associates, LLC, a New Jersey-based tax accounting firm. (www.greenbergcpa.com) With 30 years of experience as an accountant, Greenberg has developed a diversified background to service his clients’ needs. Greenberg has extensive media experience both nationally and locally, commentating for the Wall Street Journal Report, Fox Business News, Bloomberg News, Forbes TV, and local TV in Philadelphia with ABC, NBC, and Fox. He has appeared as an analyst on the economy, stock market, taxes, budget issues, school issues, and more.

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