There is a major exception to the depreciation requirements, it is called Section 179.  This refers to the part of the I.R.S. code where the rule is found.  Under Section 179 provisions, businesses can completely write off the asset in the year of purchase.  This allows for a much greater tax deduction in the current year.  There are limits to the dollar value that can be written off using Section 179 every year, the limit reached $100,000 in 2003 and has been adjusted upwards for inflation since then.

The reason that a business would care which method is used derives mainly from need based on tax burden.  If your business is just starting and you will have no taxable income in the current year, but you expect to in the coming years. Then your best option would be to depreciate over the longest period of time available to you.  But, if you have an unforeseen bubble of tax burden that you do not expect to occur in the future, then Section 179 might be a viable alternative.    Items, regardless of cost, that you expect to wear out or consume in less than one year, should just be expensed in the current year.

Cellular telephone:  The basic monthly cost of a personal cell phone can never be written off as a business expense.  This remains true even if you sometimes use the phone for business calls.  You are, however, allowed to use as an expense any increase in your monthly plan; i.e. changing plans from 400 minutes per month to 900 minutes per month because of expected or actual business usage causes you to pay an extra $70 per month.  Even though the total bill may be $120 per month, you may only claim the additional $70 as a business expense.

Home telephone:  The basic charges for the first line can never be claimed.  Business calls charged on the first line can be claimed and need to be documented.  If you have a second line installed for business purposes such as office phone or fax, those costs can be written off as a business expense in their entirety.

Both of the above sets of rules correlate to the subject of next month’s article: Business Mileage.  Normal driving to shop for groceries and take the kids to baseball practice is never classified as a business expense.  But, if you drive to town to drop off documents for a client, those miles can be claimed.  In the same way, your home phone is exactly that, a personal home expense and you can only write off the charges that correlate to the business.

There are many major benefits for the business owner in hiring a virtual bookkeeper.

First, there is no need to provide office space for the bookkeeper.  A virtual bookkeeper works from beyond the confines of your office, freeing space for additional staff to work on other company needs. Also, your virtual bookkeeper will not be your employee, eliminating payroll taxes and benefits that would need to be paid to an employee.  The hourly rate may be higher, but the bottom line will be improved.

Next, a virtual bookkeeper is not restricted by normal office hours.  Your business may be able to process an entire day of work, send it off to the bookkeeper at closing and receive reports with updated data in the morning.  Just last night I received bank statements for an entity and I was able to send their reconciliation reports back within a few minutes.  They are now able to move forward with the new information this morning without delay.  The greatest benefit for sole proprietors lies within this point.  Time that you might have spent on your books after finishing your “real” work can now be spent with your family or relaxing.  This benefit can indeed be termed “priceless”.

Also, business owners will now be able to hire based on quality rather than on proximity.  The quality of your prospective bookkeeper will always be higher with more choices.  This will be of the greatest benefit to businesses located in lower population areas where options for hiring a quality bookkeeper are quite limited.

Finally, you can rest secure knowing that your virtual bookkeeper will have no desire or opportunity to share your financial data with the other employees at your business.  This by itself is a significant issue for some companies.  Since a virtual bookkeeper’s livelihood depends on confidence and trust, you can also rest assured that your private data will never be revealed to anyone.