Re: 2009 Planning: Misunderstood and Abused Deductions

Dear Client:

Many business taxpayers fail to fully deduct qualifying business expenses. As a result, they may be paying too
much in income tax. Alternatively, they may be deducting such expenses improperly, which could result in
additional taxes, interest and penalties. Below is a list of commonly misunderstood deductions that you may not
be fully utilizing.

Home Office Deduction: If you use part of you home as a home office, you may be entitled to deduct
expenses related to the home office, including mortgage interest, property taxes, utilities, and repairs, etc.

General Business Expenses: If you use your personal funds for business expenses such as office
supplies, these are qualifying business expenses, which you may deduct.

[Delete this Paragraph for Taxpayers not Reporting Shareholder Loans] Imputed Interest on
Shareholder Loans: If you have loaned money to your business, you are required to charge interest on
the loan, or interest will be imputed to you. While you are required to report the interest as income on
your personal return, your business is permitted a deduction for the interest paid. If any of the interest
amount is improperly characterized as wage income to you, your business may be overstating its
employment tax liability. By recharacterizing these amounts as interest expense, your business may be
able to reduce its employment taxes and possibly obtain a refund.

Meals and Entertainment Expenses: If you have used your personal funds to pay for meals and
entertainment expenses, these expenses may qualify as a business deduction, subject to limitations.

Personal Assets Converted to Business Use: If you have contributed personal assets, such as a
computer, the fair market value of these assets may qualify as a business deduction, subject to
depreciation limitations, beginning with the date of conversion.

Communications Expenses: Expenses related to the business use of your personal telephones, cellular
phones, and internet connections may be deducted.

Automobile Expenses: Mileage and other related automobile expenses may be deducted when your
personal vehicle is used for business purposes.

If you have any questions about your business deductions or whether certain expenses qualify, please contact
our office at your convenience to arrange an appointment for us to review your expenses and documentation.

Sincerely yours,