Owning a home business offers many benefits, but it also means more responsibility. Filing your business taxes is one of the many “musts” of having your own business, and you’ll want to develop simple, consistent business habits to stay on top of matters.
Tax Records Throughout the Year
One way you can ease the pain of tax season is to keep accurate records throughout the year. You’ll need records of total sales, total deductibles or expenses, depreciation values for equipment (if applicable), local sales tax collections and total profits. Keeping records of these items is fairly easy if you develop a systematic format that’s right for you. Depending on what type of business you operate and its size, you may or may not have employees. If you do, you’ll need to keep accurate payroll records as well. Also, you’ll need to factor in 100 percent of your social security now that you’re paying your own way. At least once per month, you should assess your tax situation to find out how you’re doing in regards to paying taxes. If you earn a decent living, then you’ll probably need to save money each week or month and pay quarterly taxes. Do speak with an accountant about your business taxes. It’s too important to “guess” at what needs to be done. If your business is simple with very little expense, offers only Internet based products or services and has no employees, you can probably consult with your accountant only a few times throughout the year to find out where you stand with taxes due. For more complex business structures, a visit to the accountant will be more frequent.
Deductibles for the Home Business
You’re allowed to deduct any item or expense that assists you in business tasks or that is necessary to operate your business. For example, purchasing a computer for your business and/or any expenses incurred to keep the computer functional are considered deductibles.
Vehicle Deductible
If you drive your vehicle frequently for business purposes such as sales, delivery or business trips, your mileage can be deducted (in a converted dollar amount) from your tax bill. There are two ways to claim your vehicle on your taxes:
1. Mileage
As mentioned above, you can claim the mileage of your vehicle, but only miles you have used for business. Keep an accurate log of your mileage.
2. Vehicle Purchase and Maintenance
By calculating your vehicle maintenance, gas and oil changes, you might be able to claim more on your taxes. The only drawback is that this requires more record keeping than claiming only mileage, and you can only count a percentage for business if the vehicle is used personally at all.
Entertainment and Taxes
Did you know that you can claim 50 percent of dollars spent when entertaining a client while discussing business or forming alliances? If you want to discuss business while dining out, attending a ball game or whatever else, keep your receipt! If you have employees, you can have special events, parties, etc. for them and their families and claim 100 percent of this expense.
Other Deductible Items
*Office supplies and furniture
*Phone and Internet Connections
*Fax, Printing and Other Related Office Equipment
*Office Supplies
*Advertising Expenses
*Website Fees and Maintenance (for online business)
*Some Deductions for the Office in Your Home (utilities, insurance, remodeling expenses for the office, etc.)
*Professional fees (e.g. accountant fees and business consultant fees)
*Postage for business mailings
*Printing Expenses for envelopes, letterhead, brochures, etc.
Keep all of your receipts and organize them by week or month, depending on how many you have. The more deductibles you have, the more detailed records you should keep. Even with a very small home business, you should analyze your financial and tax situation at least once a month. This enables you to organize your records while the month’s dealings are fresh on your mind. The longer you wait, the more likely you are to forget something important that could directly affect your taxes. If you’re just starting a business, you should see an accountant to determine what types of records you need to keep and other important aspects of your taxes. Organizing now means less stress later.
Curt Miller makes a work at home income online with his computer. He shows others how to post classified ads and get paid to do it.
