Reply to classmate Aria:

Hello Class,

Ordinary expenses are considered as cost that are typically incurred by other businesses in the same industry (Cruz, Deschamps, Niswander, Prendergast & Schisler, 2024). This can include membership fees associated with professional organizations like a local Chamber of Commerce or client lunches as well. An ordinary expense must be necessary to be deducted as a business expense. Necessary expenses are recognized as costs that must be incurred to carry out your business essential functions. A common necessary expense is the use of internet service. With the current modern technology, it is almost impossible for a business to be profitable without the use of the internet, therefore the monthly bill is deductible. Any personal expenses are not considered ordinary nor necessary even is company property is used. For example, if a company car is used to go on a personal vacation, the mileage cannot be used as an ordinary expense.

To be deemed reasonable, it is an issue of fact and circumstance and can be difficult to determine because of the subjectivity and multitude of factors involved in determining price. (Cruz, Deschamps, Niswander, Prendergast & Schisler, 2024). For example, if a taxpayer enjoys a personal benefit incidental to the expenditure, then this could be considered reasonable. A circumstance of being reasonable can be tested by determining whether the expenditure is comparable to an arm's length amount such as a price charged by objective individuals who do not receive any incidental personal benefits.

Many self-employed taxpayers question whether they should deduct home office. There is a question of whether it is regularly or exclusively. It can't be used once a year and it be considered a home office (Cruz, Deschamps, Niswander, Prendergast, & Schisler, 2024). By exclusively there must be a clear distinction between home office and personal living area. If this includes dining room tables, your bed or couch then it would not classify as office space because it has a personal purpose. Challenges with vehicle or travel cost include purpose of the trip, miles traveled, and the location went. Problems arise with inconsistent recorded mileage, and auto expense records.

To help promote diversity, equity, or inclusion (DEI) among small business owners they can allow deductions for expenses related to DEI training and development programs (Cruz, Deschamps, Niswander, Prendergast & Schisler, 2024). This will encourage small businesses to invest in creating an inclusive workplace culture. To help reduce financial barriers to starting a business, tax credits or deductions can be offered for start-up costs. Implementing tax credits for businesses that invest in underserved communities promoting economic development and job creation in diverse areas could also be beneficial. Promoting businesses to engage in supplier diversity programs and encouraging them to source can also boost tax provisions amongst small business owners.