There are a lot of obstacles to overcome when you have a home business. Tax season could be one of the biggest obstacles you face. The tips in this article will give you some ideas on how to navigate the tax waters.
It is very important to maintain a log of all your business expenses. Remember, depending on the sort of business you have, you might be able to write off car mileage, meals and entertainment. You are allowed these write-offs in certain situations, but have to document the client or prospect involved. Check with your tax advisers about what you can and cannot write off as a business expense. Just as important is documenting all profits to your business. Sometimes an additional profit might take the form of an incentive or gift from a company with which you do business.
Besides documenting all your expenses and profits, make sure you save all your receipts. In case you are ever audited, you will be glad you did. Remember, some receipts come to you in the form of emails or faxes, and those must be saved also. One good strategy is not only to save these virtual receipts on your computer, but to print a hard copy as well.
There is a write-off many home business owners forget to claim. This is the home office deduction. If you legitimately work from a home office, the IRS lets you claim the home office deduction and corresponding write-offs. One thing to remember is to make sure this space you are classifying as a home office is actually a home office, since misusing this deduction is a red flag for the IRS.
Always keep in mind purchasing new equipment is a tax write-off. This comes in handy if you are at the end of the year and need to offset unexpected profit with a deduction. Depending on the cost of the equipment, you might be able to itemize it over several years. In other words, you would write off a third of the cost each year for the next three years.
When you have a home business, get a phone line exclusively for the business, so you can write it off. Also, any business-related long distance calls are also a tax deduction in the eyes of the IRS. The business line could also be a cellular phone.
Always remember to deduct the salaries you pay to any employees, whether full or part-time. Even if an employee is seasonal, you can deduct his or her salary. Keep in mind that this applies to family members as well.
Learn as much as possible about the different types of deductions you can claim. The best person to be most knowledgeable about this is you. This is your business, and it is your money you will be saving.
When it comes time for tax preparation, make sure to retain a competent tax preparer. This is not the time to go with the cheapest person. A tax preparer who knows the law and all the intricacies involved will save you much money in the long run.
Tax season does not have to be stressful. Just remember to bring all your documentation to your tax preparer. By following some of the suggestions in this article, you can have a smooth, stress-free experience.