Home Base Business/Tax deductions
Did you know that you can start a home base business today and get a pay raise?
Disclaimer: All of this information is advisory and educational. It MAY NOT apply to you and your circumstances in any given year. If you have any questions about your specific situation, consult a qualified Tax Professional.
The tax savings of your business will allow you to change the exemptions on your paycheck so you keep more of your money. This can be anywhere from $200 - $500 a month. That is an additional $5,000 of spending money per year in your pocket if you conduct your home business as a real business. The tax laws that allow small business owners to garner substantial tax breaks are the same laws that GM and IBM benefit from. The only difference between most home businesses and these Fortune 500 entities in the eyes of the IRS is their size Here is his list of potential deductions for your business: The IRS requires written documentation to qualify for the deduction, NOW is the time to start keeping your receipts! Create 9 folders for the following major areas. Legal, Vehicle, Travel, Advertising, Office Expense, Office Supplies, Meals, Utilities, and Other (Misc). These categories are the most common based on the IRS Schedule C self-employment tax form. Keep an additional folder for Credit Card Statements. A monthly review will always find additional business expenses. Every time you have a receipt just throw it in the folder. ___________________________________________________________ Business Startup: This is the expense that actually starts your business. (Use your credit card statement or your canceled check). Vehicle: This is a BIG ONE. Mileage to or from presentations, training events, product launches, or even a golf outing with prospects! etc. If you travel to get business supplies that is deductible. The primary reason for the trip must be business. (The current mileage deduction is over 50 cents per mile and increases yearly!)
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Home Base Business/Tax deductions
Not recording your mileage is like throwing a $1.00 dollar bill out the car window every 2 miles. Document with mileage log, the IRS requires some sort of logical, written documentation of this. Use a small 2 x 3 inch spiral note book and keep in glove box. It needs Date, purpose, start mileage, end mileage, total mileage on the trip, and total mileage for the month. You will also need the year’s start and ending mileage numbers off of your car’s odometer for the tax form. Make it a habit to log your mileage every time you get in the car. Business Meals: When you do a presentation at a restaurant/coffee shop, pick up your receipt! This is a deductible expense (50%). For that matter, so are theater and sports event tickets, and other expenses relating to entertainment focused on building relationships with prospects, customers and other home business professionals. (Remember, by definition, everyone is a potential prospect or customer of your home business!) Business Travel: Travel to pre-arranged presentations. Going to visit your sister to discuss your business? Is your wife/husband going? Are they working with you in the business and will they be at the appointments? Their trip is deductible too! Airfare, train fare, and car mileage All “fees” related to travel-parking, tolls, security, etc. Meals while on the trip (subject to limitations) Entertainment expenses (subject to some rules and limitations) Out of area training Additional benefits for travel professionals - another big one. Travel is deductible -- be it to an industrial center or an island resort -- if the purpose is to hold a meeting, to discuss business with other travelers, to attend a business related seminar. In the case of travel agents, you may also be able to deduct your travel if it is for the purpose of familiarizing yourself with a resort, ship, tour, etc. Your spouse's travel can even be deductible if their presence is helpful in conducting your business. Home Office: Create one area in your house to do your Business. It can be out of a closet, a desk in the corner of a room, a full room, or an office created out of some of your garage space. And the only requirement is that it be used exclusively for business. If your desk is in the TV room, you can’t deduct the whole room; just the area that you actually work in. The percentage of the house used for business calculates the part of the following that you can deduct from your taxes: (Document with receipts). Rent (If your own your home with the bank, the interest, taxes, etc. are applied elsewhere) - Electrical bill
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Home Base Business/Tax deductions
Sewer bill Insurance (not deductible at all, unless you have a home business!) Cleaning service (as long as they clean where your office is too!) Garbage service Water bill House repairs Landscaping (if people come to your house on business)
Personal Educational Expenses: (Document with receipts) - Seminars attended - Books - Cassette/CD programs - Series tapes/CDs - Training Conference calls Advertising Expenses: - Shirts that have your business logo on are an advertising expense. - Newspaper ads - County Fair/expo booth fees - Flyers - Product samples - Company literature - Mailing cost - Websites - Reproduction costs (photocopies, etc.) Office Supplies: (Things used up) Paper clips, printer paper and toner, light bulbs, pens, pencils, highlighters. Office Expenses: - White boards, eases, and presentation flip charts - Furnishings (chairs, desks, lamps, carpet, etc.) - Equipment (Computers, printers, fax machines, PDAs, phones, etc.) - Product cases (for carrying display product in/out of the house. - Demonstration supplies Utilities: Phone bill (if your only have one phone, only the long distance calls related to business, the IRS believes that one line is a “necessity” and will not allow that as a deduction) Special services on your phone bill (three-way calling, call waiting, voice mail) Second line used for business. (Document business usage by adding to your business card/stationary) Cell phone (Document business usage by adding to your business
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Home Base Business/Tax deductions
card/stationary Internet service account and email: (Document business usage by adding to your business card/stationary). Document fees by printing billing. In-Home Presentations or Celebration Expenses: Giving a party to celebrate? Make it a business event. Invite your business associates/prospects and deduct the entire cost! Food provided (100%) document via receipts and invitation list; have attendees sign a “guest book” to document who attended. Contract Labor expenses: Paid to your children under for business related work Keep track of what is done, and how much paid, by check, canceled check is proof. If your children are under 14 and have no other sources of income, all wages under $4,000 per year are tax free. It's a great way to help save for college with Uncle Sam's help! Emptying the garbage Mowing lawn, other landscaping (part of home expense) Cleaning your office Filing Computer work (Most kids are better at computers than we are!) Envelope stuffing/postcard stamping, other mailing tasks Other business related items. Baby sitters Assistants
Medical: You can set up a qualified medical expense reimbursement plan and pay for expenses like braces, eyeglasses and visits to the doctor with pre-tax dollars if the plan is properly structured. The IRS's only requirement is that you legitimately treat your home business as a business -- not a hobby. That means regularly working your business. Hand out your business card, talk to everyone, all the time, everywhere you go. Let them know your business and would appreciate their business. Document all your expense and you are covered. Sandy Botkin’s book How to Lower Your Taxes Big Time is required reading. You can find it at major books stores or at www.taxreductioninstitute.com Finally, YOU know your personal situation better than anyone will from a 45minute interview at tax time. I would highly suggest that you purchase a copy of TAXCUT, TURBOTAX or equivalent and prepare your own taxes, for
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Home Base Business/Tax deductions
submission, or for organizing yourself before visiting your tax professional for the final “tweaks” and areas the program does not cover. It will save you LOTS of money, either way, and is tax deductible. If you have your taxes “done” each year by a professional, the time spent organizing your paperwork for a computer tax program will: - Reduce your fees, because the accountant will save time by not having to organize them for you. - Raise your knowledge level so you can give your accountant all he/she needs to qualify you for ALL the deductions you deserve. - Allow you to better evaluate your accountant’s services, as they relate to your situation. - Improve your filing system to reduce your tine and fees even more for next year! Congress GIVES us these deductions to ENCOURAGE small businesses! Please use all the deductions you are qualified to receive! And collect or should I say keep the extra $200 -$500 per month that you earned.
Taxes are a VERY complex issue, and no widespread communication like this would be complete without the “boiler plate” disclaimer:
Disclaimer: All of this information is advisory and educational. It MAY NOT apply to you and your circumstances in any given year. If you have any questions about your specific situation, consult a qualified Tax Professional.
This Report is supplied to you free by Roger and Sallie Gottula Roger and Sallie live in the country near Larkspur Colorado. They run a successful Home Business. www.ColoradoTravelProfessionals.com
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