NEW YORK — It seems obvious — if you use your car for business, you're entitled to a deduction. If you have a home office, there's another deduction. But accountants find that small-business owners don't always take all the deductions they might and end up costing themselves plenty in taxes they shouldn't have to pay.

INFORMATION

Information on deductions can be found in some IRS publications. If you're a sole proprietor filing Schedule C, “Profit or Loss From Business” along with your 1040, take a look at Publication 334, “Tax Guide for Small Business.” Look at “Business Expenses” on page 26.     If you need Publication 334, you can either download it or any other IRS forms and publications from the IRS Web site (www.irs.gov) or call (800) TAX-FORM for a copy. You can also have up to three items faxed to you by calling (703) 368-9694 from your fax phone.

        “One of the biggest problems for small-business owners isn't necessarily that they overlook deductions, but they don't necessarily maximize the deductions they could take,” said Barbara Weltman, an attorney in Millwood, N.Y., and author of J.K. Lasser's Tax Deductions for Your Small Business.

        For example, Ms. Weltman said she finds many company owners who use their cars for business don't try to figure out whether they'll pay less tax by using the IRS' standard mileage allowance — 34.5 cents a mile for 2001 — or by computing how much they spent on gas, maintenance, repairs, insurance, registration fees, auto loan interest or lease financing, etc.

        “You have to crunch the numbers” or you could end up paying more tax than necessary, she said.

        Ms. Weltman said many small-business owners also don't bother to do the math when it comes to Section 179 deductions. These deductions, named after an Internal Revenue Code provision, give business owners a choice — taking up to $24,000 of the cost of new equipment in the year it was purchased, or depreciating that amount over several years.

        You might be better off depreciating, Ms. Weltman said.

        “Maybe this year, if you're just starting up and don't have much income, you can't make much use of the ($24,000) deduction,” she said.

        Another common problem occurs when small-business owners look at taxes as an annual event and forget that deductions from previous years might be carried over into the year at hand.

        Gregg R. Wind, a certified public accountant in Marina del Rey, Calif., said business owners who built a home office or bought equipment that can be depreciated need to deduct the latest installment of those costs.

        And as far as home offices go, if you made improvements to your house that affected the office — for example, installed a new water heater or roof or put siding on the house, be sure to deduct the percentage of those costs attributable to the office. Mr. Wind said such expenses are commonly overlooked.

        Ms. Weltman said owners of newer businesses should remember to carry over start-up costs that can be amortized over a 60-month period.

        Other carryover deductions include losses such as capital and net operating losses and certain prepaid expenses, such as insurance premiums and subscriptions to publications. For example, if your business prepaid insurance premiums for several years, you might need to deduct each year's premium separately.

        Mr. Wind urged business owners to look through all their expenses, personal and business, to be sure they don't miss something that will legitimately save on taxes. For instance, he noted that if you joined the Rotary or a similar group to make business contacts, you should be able to deduct your membership fee.

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