This article will show two of the most common mistakes made by small business owners on a Schedule C when filing their tax returns.  The two common mistakes covered in this article are made when claiming telephone expenses.  Cellular telephones and home telephones have specific requirements as to when they can be claimed.

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.