Family Business Estate Tax

Family-owned small businesses get special treatment on their estate taxes. For 1998, up to $675,000 of the value in qualified, family-owned business interests can be excluded from a decedent’s taxable estate.

To qualify for claiming the special tax treatment, the family-owned business interest must be more than 50 percent of the decedent’s estate and the decedent’s family must own at least 30 percent of the business. A business meets the definition of family owned if it is owned at least 50 percent by one family, at least 70 percent by two families, or at least 90 percent by three families.

The exclusion will decrease in the future as the value of the regular estate tax exclusion increases. The total value of both exclusions will be limited to $1.3 million.

On the Road for Business

On the road again? Business travelers should know what expenses are tax deductible and what receipts to hang on to.

There are three types of car trips that are tax deductible: traveling from one business location to another, making business trips out of town and staying overnight, and going to temporary business locations.

Keeping a car log is essential for each business use. Taxpayers must keep complete and accurate mileage records, or the Internal Revenue Service could disallow the deduction.

There are two methods for claiming business car expenses - actual expenses or the standard mileage rate. With actual expenses, taxpayers can add all their car operating expenses for the year - gas, oil, tires, repairs, license fees, garage rental, insurance and depreciation, subject to certain limitations - and then deduct the percentage of the total that was for business, based on mileage records.

Instead of tracking actual car costs, taxpayers can use the standard mileage rate. Multiply the business mileage by the standard rate of 32.5 cents per mile.

Travel expenses are ordinary and necessary expenses while away from home on business. Taxpayers should keep whatever documents they can gather to prove where they went, why they went there, how long they stayed and how much they spent. If the travel includes some business and some personal aspects, they should keep clear records showing exactly how much is related to business.

Taxpayers should keep lodging receipts, including receipts for cleaning and laundry, telephone charges and tips. They should also keep transportation receipts, such as airline, train or bus ticket stubs, travel agency receipts, rental car or taxi receipts. These should show the dates and services involved. And, of course, keep meal receipts. Generally, taxpayers must keep a log of meal expenses and save receipts of $75 or more. If they don’t want to keep track of the actual cost of meals, they can use a standard meal allowance, which varies depending on where they are traveling in the United States. Taxpayers can generally claim only 50 percent of the cost of meals and tips while traveling.

For more information about the business use of a car or business travel expenses, call 1-800-829-3676 and ask for Publication 463, Travel, Entertainment, Gift and Car Expenses, or download it here.

Free Tax Information for Small Businesses On Paper and On-line

Keeping a small business running smoothly is no easy task, and taxes only complicate the job. The Internal Revenue Service publishes free tax information to help small business owners and sole proprietors tackle their tax obligations.

Publication 334, Tax Guide for Small Business, provides general information for sole proprietors who file Schedule C or C-EZ. Publication 1518 is a 12-month wall calendar for small businesses that provides tax tips ranging from starting a small business to planning for retirement. It also shows the taxes due each month, lists other free publications and describes ways to get tax and business information from IRS and other agencies. Publication 910, Guide to Free Tax Services, describes year-round tax services, tax season assistance and frequently requested publications for businesses and individuals. Two other publications serve more specialized audiences: Publication 225, Farmer’s Tax Guide, and Publication 595, Tax Highlights for Commercial Fishermen.

These and other IRS publications and forms are available by calling 1-800-829-3676.

Those who don’t want to wait for publications through the mail and have access to a personal computer will find that the IRS Web site, www.irs.ustreas.gov, offers forms, publications and interactive assistance. Clicking on the "Tax Info for Business" section provides frequently asked tax questions and the latest information on selected business tax topics. Business owners can browse publications online or download forms they need. The IRS Web site also provides links to other sites of interest to businesses.

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