Top Business Write-Off Audit-Triggers

From guard dogs to Las Vegas-style showgirl costumes, there's no limit to what people will try to write off at tax time for the sake of their business. But where do you draw the line? Which write-offs you're trying to write off go too far?

We assembled a team of three leading tax attorneys to get their advice on how far is too far in the land of tax write-offs. Our team of experts include Cliff Ennico, a Connecticut-based business attorney who specializes in advising small businesses and entrepreneurs; Donna LeValley, a tax attorney and contributing editor to the J.K. Lasser annual tax guide; and Alvin S. Brown, a tax attorney who formerly worked with the office of the chief counsel of the IRS for more than 25 years.

Tax Write-Off: Travel Expenses

Here's a write-off that's sometimes difficult to decide just where to draw the line. Can you deduct the cost of going to see a Cirque du Soleil show in Las Vegas if you're treating your client? The answer is yes, as long as you can justify it as a business expense. And what if your spouse goes along on the trip? As long as they're a partner or employee of your business and attended conventions or meetings on the trip you took together, then his or her travel and 50 % of his or her meals are also deductible.

• Expert Opinion: "You can deduct travel expenses, and 50% of related meals and entertainment, if the travel is reasonably related to your business," explains Cliff Ennico.
• How to Do It Right: Here's a tip from Donna LeValley that will come in handy on your next business trip: Grab an envelope from the stationary drawer of your hotel room and put all your receipts from that trip in it. Label the envelope with a name and date to help you remember that trip. The more accurate your records are, the more likely they'll be accepted and validated by the IRS if you become involved in an audit situation.

Tax Write-Off: Cell Phone Bill

If you use a cell phone as part of your business, this could be a big deduction for you. So don't make the mistake of mixing business with pleasure by sneaking too many personal calls onto your cell phone bill.

• Expert Opinion: "Because of the way a cell phone can be used, it's come under scrutiny, so people need to keep good records and keep their actual telephone bill so they can demonstrate that a majority of the calls were business calls," explains LeValley.
• How to Do It Right: Take a look at your cell-phone bill to make sure you receive an itemized report. Because cell phones are considered listed property, you need to keep detailed records of their use. In the case of a land-line, it's a good idea to have a separate phone number for your business since the IRS won't let you allocate the cost of a single phone in your home to your home office.

Tax Write-Off: Home Office

Home-office deductions used to be a big red flag for an audit back in the 1990s. These days, you just need to use the deduction with caution. A basic rule of thumb to follow? "Anything that's unusual and disproportionate to your level of income is something the IRS will check out," Alvin Brown says.

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