Tax Advantages of Owning a Home Based Business Brought to you by Jay Billups Visit us on the web Click

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Tax Advantages of Owning a Home Based Business Brought to you by Jay Billups Visit us on the web Click Powered By Docstoc
					Tax Advantages of Owning a Home-Based

                        Brought to you by:
                            Jay Billups
                 Visit us on the web: Click Here

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                  out that way in practice? Click Here
                    Why Should I Have A Home Business?
      "It is anticipated that by the year 2008, 65% of households in the US alone
                 will be involved in a home business" -Newsweek Magazine-

As you can see, home based businesses are gaining in popularity in America. This is
especially true now because the IRS has recently re-instituted the home business tax
deduction that allows home business owners to deduct up to $5,000 per year in business
expenses off of their income tax. This means that you can start a home business and not
make a dime with it and still be able to come away with an extra $5,000 in your pocket at
the end of the year!
               "A home based business is the best tax shelter left in America"
             Sandy Bodin (IRS Attorney & Tax Reduction Institute Chairman)
                         Keeping my eye on the victory!
     I thought some of you might be wondering what is Deductible and what is not.
The first step in reducing taxes is to know what is deductible. A simple definition of a
deductible expense is an "ordinary and necessary expense you incur while furthering your
business for profit'. If that seems vague, keep in mind that Congress intended the tax code to
be general, because all deductions are unique to the particular facts and circumstances of a
particular person and/or situation. My tax guy has defined ordinary as "one that is helpful and
appropriate for your business". However, an expense does not have lobe indispensable lobe
considered necessary. In the networking business it is not unusual to have an expense that is
used partly for business and partly for personal purposes. You can divide these expenses and
deduct the part that is for business. (Example: I wrote off a trip to Mexico and even though I
stayed with friends, the purpose of the trip was business so I wrote ALL my expenses off...
airfare, rental car, food... but not the lodging since I stayed with friends In the audit for that
year, the auditor let it go after I explained it).
Limits on Losses: If you DO NOT carry on your business activity with the intention of
making a profit, you CANNOT use it to offset other income. If you deem this to be a hobby,
or for sport or recreation, then you are eligible to only deduct the expenses of the hobby up
to the income the hobby generated. Some people DO choose to work network marketing as
a hobby... so this applies to them!

        Be SURE you document your expenses as all of these things can come up in
       your business and can be used to offset taxes paid to the government:
    1. Advertising. Literature, price lists, catalogs, display and classified ads. Printing of
       flyers, brochures, newsletters andbusiness cards. Product demonstrations, new

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     productsused for promotion or samples.
 2. Answering Service. Payments for taking phone messages. Could be an outside
     service or someone in your home (possibly your children, yes, they ARE tax
 3. Bad Debts. Anything due but uncollected - based on actual expenses - could be
     rep or customer that didn't pay.
 4. Bank Charges. Service fees, checking costs, including imprinting overdraft
     protection, and any costs or penalties from late charges or insufficient funds.
 5. Business Gifts. Items given to any prospect, customer or associate, up to $25.
     annually per recipient.
 6. Car/Tuck Expenses for business purposes: lease, insurance, tax, license,
     maintenance -gas, oil, wash, wax, repairs, replacements, parking and toll fees.
 7. Continuing Education/Educalional Supplies. All business related schooling - self
     improvement related to business - usually from an institute of higher learning.
     Know any students who need to write-off their education?
 8. Conventions & Seminars. Transportation, tickets, and other costs
     associatedwith attending or participation. Including meals and incidentals.
 9. Demonstrations & Training. Items used or consumed to illustrate quality.
     Product testing Self use of products (first time). Portion of groceries used for
     business(cookies &• coffee meetings, etc.).
 10. Dues & Publications. Newspaper and magazine subscriptions. Any purchase
     from a newsstand Fees for business, service clubs, professional associations,
     COUNTRY CLUBS, and physical improvement centers. Any distributorship
 11. Entertainment. Costs of meals, theater, shows, games, sports events, catering
     and refreshments. for occasions when promoting your business with prospective
     clients! Entertainment expenses are only SO9o deductible.
 12. Home Office/Maintenance/Repairs/Insurance. This is a category for only
     home office expenses, not for office expenses outside of the home (which are
     100% deductible). Include the business portion of homeowners insurance, as
     well as repairs and maintenance like carpet cleaning household cleaners, a new
     roof, window replacements, etc. (Expenses outside the home belongs in #16, as
     does any meeting places you have expenses for and any home office decorations).
 13. Incentives and Awards. Pins, plaques. applicable product discounts, rewards
     (cost of contests or prizes - expenditures to generate sales, including raffles,
     drawing and door prizes. Also, personal gifts that are over $25.
 14. Interest. Interest on business loans, installment payments of auto, furniture,
     equipment and credit card interest charges
 15. Laundry & Cleaning. Cost of preparing home and furnishings for meetings,
     including drapenes, carpets, and cleaning products. Cleaning of any items that
     clearly identify your business -logo shirts, jackets, etc.. All dry-cleaning after
     you return from a trip!
 16. Office decorations/Maintenance/Repair. Interior decorating items used in your
     office -wall hangings, potted plants, etc.. Cleaning of Office - carpet, drapes,

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     windows, machines and equipment, painting, flooring, resurfacing, concrete fixing
     new glass, hardware supplies and small equipment purchased for such work.
 17. Office Supplies. Office paper and pencils supplies, file folders, product order
     forms, bookkeeping and art supplies, small equipment items such as calculator,
     stapler, paper punch, groceries for home meetings or entertainment, refreshments:
     cups, napkins, blackboard and easel or guest book. Photocopies, & FAX.
 18. Postage/Freight. Stamps for all correspondence, newsletters, IRS audits,
     Christmas cards, bills, and all cost certified, registered, and insured mail. Parcel
     post shipments, handling charges, costs of product shipments sent and received -
     including gifts, catalog item mailing costs, and special carriers like UPS, Federal
     Express, or Airborne, etc..
 19. Professional Services. Payment for services of all kids including attorneys,
     accountants, business managers, tax service, etc..
 20. Research & Development. Product testing. Cost of expansion into out of state
 21. Promotion. Business related meals, recreation, entertainment incurred outside
     the home on behalf of clients and yourself.
 22. Rent. Applicable business portion of house rent. Meeting rooms, or storage
 23. Security. Locks, garage door openers, tear gas, mace, electronic sensors, alarms -
     including installation and repair, guard dog care and feeding, and sometimes
     self defense classes.
 24. Taxes & Licenses. Business portion of real estate taxes, sales, and excise
     taxes, (Do not include sales tax of inventory purchased if purchased is gross
     figure), business license.
 25. Telephone. All telephone costs, including service charges, message units, long
     distance calls and pay phones.
 26. Training. Costs of materials, equipment and supplies used for training associates..
     Costs related to your own training, i.e. books, tapes, fees.
 27. Travel. Travel costs such as plane fare, tan and bus fare, rental cars, meals and
     lodging, tour and guide fees, and any special arrangements (translators).
 28. Utilities. Business portions of natural gas, electric, heating oil, water and

Consider a HOME BUSINESS... "Let Your MONEY Work For YOU"!

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