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Daycare and Taxes All things related to Taxes and running a Daycare post here. Topics of tax exemptions, forms, filings, tax write offs, IRS etc.

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Old 08-23-2011, 07:14 AM
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Default Do You Deduct Online Purchases?

I've heard of small businesses getting audited and in trouble for trying to deduct their online purchases, because taxes aren't paid.

How is it that garage sale purchases can be a 100% write off but not online things? Taxes aren't paid on either so I'm confused. Last year I deducted all online purchases and my tax person didn't say I couldn't.
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Old 08-23-2011, 07:23 AM
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I do, because its like getting from rummage sale. Never heard that you cant deduct if you dont pay taxes on something?
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Old 08-23-2011, 07:25 AM
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Originally Posted by lilrugrats View Post
I do, because its like getting from rummage sale. Never heard that you cant deduct if you dont pay taxes on something?
And it's still going towards your business. I can understand the gov being upset about not paying taxes, but they should go after the big places like Amazon and make them charge taxes, not come after us! I mean, of course we'll go after a better deal online!!
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Old 08-23-2011, 07:59 AM
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Do you mean state taxes? In MI on our tax returns, there is a spot to pay taxes on any on-line purchases that weren't taxed. It's an honor thing though-they have no idea what people buy online. I wonder how many people voluntarily pay it?
I do deduct my online purchases. They are a business expense just like any other!

Last edited by momofsix; 08-23-2011 at 08:00 AM. Reason: addition
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Old 08-23-2011, 08:08 AM
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Any purchase made for wor is tax deductible...whether you purchase it at a 2nd hand store, a garage sale, online, etc.

Get a receipt from the individual you are purchasing the product from or make yourself a receipt.

If I purchase something online, I just have the person I'm buying it from send me an email stating the price and the item description. Or if you buy from Craigslist, just print off a copy of the ad!
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Old 08-23-2011, 08:33 AM
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I don't because I want a receipt for everything just in case. I make some purchases for daycare online but not enough to really matter anyway. Now if I ordered some kiddo furniture or a big ticket item then yeah I would claim it and use the invoice as receipt.
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Old 08-23-2011, 08:57 AM
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Quote:
Originally Posted by wdmmom View Post
Any purchase made for wor is tax deductible...whether you purchase it at a 2nd hand store, a garage sale, online, etc.

Get a receipt from the individual you are purchasing the product from or make yourself a receipt.

If I purchase something online, I just have the person I'm buying it from send me an email stating the price and the item description. Or if you buy from Craigslist, just print off a copy of the ad!
Good thinking!

I went to Walmart last night to find an extra wide baby gate. They didn't have any that went wide enough. On Amazon, I found one cheaper than the cheapest at Walmart-and it's big enough! I'm going to put some toys on that order, too.

If I would get a set of stainless steel cookware, that could be in the "shared" category, right? Obviously I'd still use it for work since I cook.
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Old 08-23-2011, 09:03 AM
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A dentist friend of mine got audited for online purchases and had to pay the taxes on the items purchased online after the audit was complete. He will also be getting reviewed/audited for the next 7 years due to this and will each year have to pay the taxes he should have paid from online purchases. The total he owed due to this was something like $42. How annoying though!

I think you should be able to deduct the items you purchased and if something comes up you then pay what you owe to the irs for the taxes that should have been collected when you paid in the first place. Maybe Tom Copeland can give us some advice on this?
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Old 08-23-2011, 09:39 AM
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Quote:
Originally Posted by jojosmommy View Post
A dentist friend of mine got audited for online purchases and had to pay the taxes on the items purchased online after the audit was complete. He will also be getting reviewed/audited for the next 7 years due to this and will each year have to pay the taxes he should have paid from online purchases. The total he owed due to this was something like $42. How annoying though!
This is what I was talking about, but didn't know about the 7 years thing! That's crazy!!
Maybe I'll give my tax person a call to double check.
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Old 08-23-2011, 11:18 AM
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Quote:
Originally Posted by jojosmommy View Post
I think you should be able to deduct the items you purchased and if something comes up you then pay what you owe to the irs for the taxes that should have been collected when you paid in the first place. Maybe Tom Copeland can give us some advice on this?
The federal government doesn't collect any sales or use taxes. If any sales taxes are owed on online purchases it would be to your state or city/town/municipality.

I'm no expert, but I seem to remember that many of the online retailers don't charge sales taxes in states where they don't have a physical presence. I know Amazon has a corporate policy that's pretty detailed so that they can specifically avoid charging sales taxes in as many states (if not all of them) as possible.

I would imagine that a lot of states have the "honor" system mentioned by a PP (mine does) to attempt to collect taxes that they feel they are owed.

Whether you pay the sales taxes to your state or city or not, the purchase is still deductible on your federal return if it meets IRS standards.
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Old 08-23-2011, 12:28 PM
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Quote:
Originally Posted by MyAngels View Post
The federal government doesn't collect any sales or use taxes. If any sales taxes are owed on online purchases it would be to your state or city/town/municipality.

I'm no expert, but I seem to remember that many of the online retailers don't charge sales taxes in states where they don't have a physical presence. I know Amazon has a corporate policy that's pretty detailed so that they can specifically avoid charging sales taxes in as many states (if not all of them) as possible.

I would imagine that a lot of states have the "honor" system mentioned by a PP (mine does) to attempt to collect taxes that they feel they are owed.

Whether you pay the sales taxes to your state or city or not, the purchase is still deductible on your federal return if it meets IRS standards.
Good to hear. Thank you! I have a large order waiting for me in my Amazon cart. An extra wide gate, a few toys, and cookware-all with free shipping!!
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Old 08-23-2011, 12:44 PM
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Um yes, half my items I buy come from online!
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Old 08-24-2011, 10:25 AM
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Default Online purchases

You are clearly entitled to deduct business items purchased online. The IRS can't deny a deduction simply because it was purchased online.

It sounds like this is a state sales tax issue and therefore this was a state audit, not an IRS audit.
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