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9 Process Server Tax Tips for the Year End

Editor’s note: ServeReport writers are not tax advisors and you should not make financial decisions based on the advice in this article. We are simply offering you ideas to consider during your tax preparation. Please consult with your own tax advisor or attorney before taking any action regarding how you treat expenses in your tax filings.

With 2010 fast approaching its conclusion, it’s time to start developing a strategy to save you as much money as possible during the 2011 tax season. During this time, it’s important to figure out how your business-related expenses can be turned to your advantage when dealing with the IRS. We have included some tried-and-true tax deductions for process servers and private investigators as well as some updated or brand-new IRS tax provisions that may help your bottom line.

1. Start-up costs for new small businesses

If you started a new process server or private investigator business in 2010, you might benefit from a tax deduction for start-up costs. The IRS says, “Section 2031 allows up to $10,000 as a deduction for start-up expenditures and provides for a dollar-for-dollar reduction of the $10,000 deduction if start-up expenditures exceed $60,000.”

2. Mileage for business use of cars

The Internal Revenue Service (IRS) said that people using vehicles for business purposes could deduct 50 cents per mile driven in 2010. That amount will increase a penny to 51 cents per mile in 2011. If you plan on claiming your car as a business expense, you need to first decide whether you will use the car solely for business because that will determine how much you can deduct. The IRS has two ways to decide how much you can deduct, the standard mileage rate method and the actual expense method, so you should visit the IRS website to determine which you are eligible for and which will save you the most money.

3. Buying “non-traditional” vehicles

The IRS is issuing tax breaks to those who purchase environmentally friendly vehicles. If you buy or lease a hybrid gas-electric or alternative-fuel vehicle before Dec. 31, 2010, you can receive an income tax credit. According to the Department of Energy, the amount of this tax credit is dependent on fuel economy, vehicle weight, and whether the tax credit has been phased out because the manufacturer has sold its quota of 60,000 vehicles.

You can also potentially get a tax credit if you buy or lease a plug-in electric vehicle. Depending on the vehicle’s battery capacity, the credit can range from $2,500 to $7,500. To learn more about specific requirements and qualifications, visit the IRS website.

4. Equipping your business

Section 179, which allows you to write off newly purchased equipment, has doubled to $500,000 because of the Small Business Jobs Act of 2010. Keep in mind that qualifying Section 179 property must be purchased and put into use by Dec. 31, 2010. Small-business owners can write off property including:

  • Office furniture and equipment, including scanners, fax machines, printers and copiers
  • Computers and off-the-shelf computer software
  • Other equipment and machines purchased for business use

5. Carrying back 2010 general business credits

Eligible small businesses can carry back general business credits five years, as opposed to previously only being allowed to carry credits back one year. This carryback would provide tax refunds to businesses that were profitable but are now dealing with losses. According to the IRS, “the carryback is for credits determined in the first taxable year beginning after December 31, 2009.”

In order for your business to qualify for the carryback, the IRS specifies that it must be:'

  • A corporation whose stock is not publicly traded, a partnership, or a sole proprietorship, and;
  • The taxpayer must have $50 million or less in average annual gross receipts over the three preceding tax years.

6. Deducting your marketing dollars

Spending money on marketing your business (even during a down economy) is key to achieving growth. These expenditures can also be written off during tax season. Marketing expenses that you can deduct include:

  • Billboards, posters, fliers, and brochures
  • Money spent on promotional activities such as contests, special events to attract business or sponsorship of local events
  • TV and radio advertisements
  • Business cards
  • Money spent creating and maintaining your business website
  • Sponsorship of a sports team
  • Advertising to fill a vacant position within your company
  • Online directory listings
  • Phonebook listings

7. Association membership

Not only is joining your state or national association a smart business decision because of the networking and educational opportunities, but the membership fees are also deductible. Make sure you document how membership in the association is related to your profession, and keep any receipts as proof that you paid your dues. If you subscribe to trade publications or publications from your association, those costs can also be written off.

8. Business-related education

As in most careers, process servers and investigators can benefit from engaging in continuing education. Education helps process servers and investigators to excel in their jobs using newer technology, more effective techniques and knowledge of the latest legislation. The money you spend on classes, seminars, conventions, videos or CDs is tax deductible as long as these expenses are directly related to your profession and meant to improve your on-the-job skills and knowledge.

9. “Ordinary and necessary” business expenses

The following business expenses are classified as “ordinary and necessary,” which makes them deductible: bank service charges, business-related magazines and books, casual labor and tips, coffee and beverage services, commissions, credit bureau fees, office supplies, parking and meters, postage, and promotion and publicity.


The lesson to take away from the preceding list of deductions is that while it’s sometimes painful to open your wallet and spend money on your business, you can get some of that money back come tax time. All it takes is careful documentation of your expenditures, organization of your receipts and invoices, and possibly consultation with your trusted tax advisor or accountant. Good luck to you and your business in 2011 and feel free to send your favorite tax tips our way.


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