Tax Tips for Home-Based Business Owners

As tax time approaches, many home-based business owners begin completing their forms or paying their accountants with trepidation. This nervousness comes from two sources: a fear of being audited and a fear of having to pay a lot. For the most part, both of these fears are unfounded.

For one, audits are rare. In fact, only 0.5% of taxpayers are subjected to audits every year. And if you do beat the odds, keeping good records and maintaining receipts will help you weather the IRS storm.

Obviously you have not control over whether or not your return is chosen for an audit, but you can control how much you are going to owe the government this year. Most people who own small or home-based businesses end up paying more than they should in taxes simply because they are not taking advantage of all their deduction possibilities, even those that are right around them every day.

Your Automobile

You may not realize it, but one of your biggest potential tax savers is sitting in your garage right now. Most people realize that their car can be a tax write-off if it is used for advertising purposes, but the majority of home-based business owners don't realize that it they may also be eligible for deductions as well.

For example, if you drive your car to the post office to buy stamps for your business or if you drive to the office supply store to stock up on paper clips, you can claim that mileage on your taxes. You can even claim the mileage if your business-related stop was made on the way to picking your daughter up from ballet class or dropping your dog off at the vet.

In addition, you can write-off other automobile related expenses such as gas, insurance, and parking costs if they pertain to any business related activity.

Be sure to keep records, however. You will want to have a small notebook in your car at all times so you can jot down your start and stop mileage as well as a note about the business activity in which you are engaged. Keep all gas, parking, and insurance receipts as well if you plan to claim those as business expenses.

Your Family

If you pay your children an allowance, you can also count these as deductions if you hire them as part of your staff. Any business owner knows that the money he or she pays to employees does not count as part of their profit. The same is true for home-based businesses.

Most business owners also know they can find employees among their own family without raising any eyebrows. The same is true for home-based businesses. You can hire your fourteen year old to help you answer phones, file, or type up correspondence. You can offer your eight year old a job emptying wastebaskets, straightening your office, etc. Then you pay them a certain amount of money every week for their labor.

Again keeping records is essential. Keep track of the hours your children work for you as well as the activities they do. Pay them, if possible, by check from your business account. You can set up a checking or savings account for the children in which the money can be deposited.

Your Home

Obviously if you worked in a small office building you could deduct the amount of rent you paid for that property from your taxes, as well as the costs of all the equipment and expenses. Well, just because you work out of your home that does not mean you lose out on those deductions.

Chances are you have a small area of your home that is set aside for your business purposes. Now while you cannot write-off the cost of your entire house, you can write-off the cost of that area.

What you do is determine what percentage of your home's total square feet is dedicated to your business. For example, if your office takes up 10% of your home's total area and you pay $600 per month for the property, you can claim $60 per month as a business expense which would be $720 per year.

The same formula works for your utilities, such as electricity, water, and telephone (unless you have a separate line just for business). All of your equipment - your computer, printer, scanner, cell phone, printer ink, etc - is also tax deductible.

Remember to keep track of those expenses and hold on to your receipts in order to claim them on your taxes.

When it comes to tax time, no home-based business owner needs to feel afraid. By taking advantage of all your potential deductions and keeping thorough records, you can not only significantly reduce your yearly tax bill, but you can also prepare yourself in the rare event you may be chosen for an audit.

Vishal P. Rao is the owner of: http://www.work-at-home-forum.com/ An online community of people who work at home.

Cadillac Deville rentals Bingham .. Lockport Chicago limo O’Hare

---

Employment Taxes ? What Are They?

If you have employees, you are responsible for paying a... Read More

How to Maximize Your Home Business Tax Deductions for 2005

Someone once said, 'the best way to calculate your taxes... Read More

Tax Jokes and Quotes

Do you realize that some tax forms ask you to... Read More

Military Reservists, Enlistees May Get Deferral of Back Taxes

Reservists called to active duty and enlistees in the armed... Read More

IRS Lock-In Letters ? What?s An Employer To Do?

Employers often ask employees to designate the amount of tax... Read More

What is a Federal Tax Lien?

A Federal Tax Lien (FTL) is a legal instrument that... Read More

Small Business Tax Deduction - Write-Off Bad Debts

Practically every small business has receivables that it cannot obtain... Read More

Fraudulent Tax Shelters ? KMPG Goes Down Hard

In the largest criminal tax case ever filed, KMPG has... Read More

The Internet Tax Man Cometh

Q: I was contacted by the city tax collector to... Read More

Business Tax Loophole: Leasing Assets To Your Corporation

While there are many equally valid reasons to incorporate, saving... Read More

Small Business Tax Credit - Americans with Disabilities Act

Many small businesses complain when confronted with the expense of... Read More

Slash Tax when Buying a Business

When buying a business, how the "purchase price" is made... Read More

Identity Theft ? Impacting Your Taxes?

If your identity is stolen, your finances can quickly become... Read More

Home Based Business Tax Deductions

Running a home based business reaps many wonderful tax deductions... Read More

Paying Workers ? What Can You Write-Off?

As your business grows, you are going to need help.... Read More

Where to Find Tax Breaks for Your Home Based Business

April 15th looms in front of most people every year... Read More

Anticipating Your IRS Refund Can Cost You Plenty

While accountants are reaching for aspirin, millions of Americans are... Read More

Keeping Your Own Money ? NOT Handing It Over To The Taxman

Most people trying to make a crust online (or offline... Read More

The Implications of Income Tax Charge on Estate Planning

OverviewIn the Pre-Budget Report of December 2003 the Chancellor Gordon... Read More

Corporations Failing To Claim AMT Exemption Overpay Taxes By $11,000

Does your incorporated business pay alternative minimum tax ["AMT]? If... Read More

Another Tax Loophole

Just image, you are a small manufacturing company, business has... Read More

How to Reduce the Estate Tax Using the A-B Revocable Living Trust

In a past article I relayed the plight of the... Read More

Employment Taxes ? Depositing With The IRS

If your business has employees, you must pay employment taxes.... Read More

Euro Tax Haven Threat

Media reporting of a new EU savings tax directive has... Read More

Insider Guides to IRS Audits!

Ever wish that, as a business owner, you knew exactly... Read More

limo rental Des Plaines ..