the tax-saving pundits say, it is not a very good idea to make payments to relatives and show them as business expenses. The tax auditors scrutinize such expenses under a microscope. If you do not have justifiable cause to make the payment to your relative, do not do it.

But, all the expenses that are made directly for conducting the business are claimable. These include the expenses incurred on the transport or on the vehicles themselves in running the business. There are two ways to claim vehicle tax deduction. The first is the standard mileage method I which the sum is deducted by per mile formula which is devised by the IRS itself. The second method is the actual expense method in which the actual costs incurred in operating the vehicle are deducted. Depreciation charges and gas and maintenance bills can be shown here.

If you need to entertain clients on a regular basis, then it can be shown for deductions. About half of the entire expenses incurred in entertaining clients could be claimed. This could include expenses like throwing parties for your clients, taking them to restaurants, concerts, movies or even for inviting them over. Needless to say, there should be some proof that the meeting was for business purposes and not plainly for pleasure. Each bill needs to be shown, and the purpose of the meeting written on each of them.

It is a good business habit to file and keep records of all expenses incurred during the course of the year. These could be claimed as deductions when the assessment time comes. Your everyday expenses to keep the business going like rent, stationery, maintenance and electricity bills could be shown in such expenses.

Make a habit of filing your expenses in different folders so that they are easily accessible at the end of the year. Also keep these records after the tax is paid, because they could be needed for verification at any point of time.

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