Saturday, January 12, 2008
You may be missing some very important deductions. You must itemize your deductions for your home business operation on a separate schedule just as you would for your personal deductions. Knowing which deductions you are entitled to can save your home business hundreds of dollars a year.
Here is some background information on how your income tax amount is arrived at by the IRS.
The U.S. taxation code states that almost all income is subject to federal income tax. The way that you, as the owner of your home business, arrive at the final amount of income tax is as follows:
Gross Income - (All Expenses + Miscellaneous Deductions + Depreciation on Assets) = Taxable Income.
Taxable Income X (Your Tax Rate) = Income tax for the fiscal year.
Here is a quick definition of the terms in the above taxation equation:
Gross Income = The total of all income for the year after the cost of the inventory has been paid for.
Expenses = All costs of doing business during the fiscal tax year. Examples include payroll, materials, supplies and interest on business loans, etc. To find out if an expense qualifies as a legitimate business expense, consult your accountant or the IRS.
Depreciation = This is the way of spreading out the deductibility of an asset over a period of more than one year.
The IRS has certain different depreciation schedules for different business property. This is done for assets like real estate, equipment and other assets with a long economic life. This method of taxation write-off has certain advantages. Be sure to talk to your accountant regarding proper depreciation rules. These rules are subject to change by the Congress and the IRS.
This is an often misunderstood and overlooked way to save a lot of money on taxes. Remember that these types of expenses must be totaled up and declared on a separate schedule of your income tax forms.
Always track your expenses and be sure to save at least one copy of every deduction. You will be asked for proof of every transaction that is declared as a deduction if you are audited by the IRS!
Here is a list of some of the things you can deduct from your income taxes:
Business related expenses include:
1. Air fares
2. Auto expenses
3. Books and Magazines
4. Educational Expenses
5. Home Office Space* + a portion of utilities, telephone, and maintenance costs
6. Office Furniture
7. Cleaning Expenses
8. Meals with Business Clients
9. Laundry Expenses (When Traveling)
11. Impairment-related Expenses
12. Licenses and Regulatory Fees
* If you own your home you must use the IRS depreciation rules to determine this deduction. If you rent you may also deduct a portion of your rent.
Check IRS Publication 535 to find out if you can deduct any or all of the above.
As you can see there are many deductions that are allowable for your home business. The best way to get more information on tax deductions and related information on income taxes is to go online to www.irs.gov. There you will find a helpful search engine containing thousands of government publications that you can research and print out if you need to.
Now you have a good idea of the deductions you are entitled to take. So do your research, keep track of your expenses and take all of the deductions you can for maximum profit every year.
Friday, December 14, 2007
Some of the disadvantages are: you may find yourself lonely if you are used to having others to lighten the mood or share the day, you can feel isolated, others can expect you to be open to doing all sorts of errands with or for them since you are home all day, and you have no guaranteed paycheck since your profits are dictated by your business.
There is one thing that everyone working from home should know and appreciate, however. That is, when talking to anyone in the offline world, you must seem like you are a regular business the corporate person can relate to. In other words, you must appear to be on the same level as they are. You must not have doorbells ringing, music blasting, dogs or children interruptions, and must appear to be working in an environment that is conducive to order and discipline. If a potential customer overhears your wife in the background yelling at the kids or slamming a door or other distractions, you can be sure they will think that your business is not up to par and that you do not take your business seriously.
So, enjoy working at home, but, please make an effort when you place phone calls. Just this simple little command of your place and time will show respect to the person at the other end of the line and will gain you much more business.
You should always return phone calls when scheduled and you must always do a polite follow up to recap a conversation when you expect more action. A simple note that is written by hand will showcase your sincerity with a potential customer as that is not done much in the business world anymore. However, standing out from the crowd is exactly what you hope to accomplish and what will get you the customer and job for which you are competing.
Keep a daily log of what you what to accomplish each day. Make up a to do list each evening when the day coming is fresh and put the most important jobs at the top of the list. Crossing each one off will give you a sense of accomplishment and keep you on track to achieve a full day's work.
Working at home can be relaxing, fun and stressful all at the same time. Take the situation in hand by outlining your goals, making your time count each day, avoid distractions, and think of yourself as a big business until you become just what you desire.
Thursday, December 13, 2007
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