Finance Tax Time

This coming tax season you may be able to deduct more than you thought. If you operate a home-based business, especially if you work at home on the computer then you can use your home office as a deduction. This applies whether you own or rent and the deduction extends to utilities, insurance, and repairs to name a few. There are of course some general requirements as to whether or not your home-based business qualifies as a deduction that the IRS has imposed.

First of all whatever area you designate as your home office must be exclusively and regularly used as an office. You can’t put your desk and your computer in your bedroom and write a few emails and call that a home office. It has to be a functioning area set aside for your business where you work at home on the computer every work day. Secondly, the place that you designate for your home office must be where you principally do business in order for it to qualify as a deduction. In other words all of your administrative activities must be done in your home office and can only be done at that location.

When you are preparing to utilize your home office as a deduction you can only deduct a percentage of the rent, utilities, taxes, and others based on the percentage of your house that you use for your office. So, if you know the square footage of your house then measure the square footage of the room that acts as your office, calculate the percentage of that room compared to the whole house and use that percentage to calculate the deduction. For example, if your office is 25% of your house than deduct 25% of your rent and 25% of your phone bill.

Of course you will want to remember to save all of your receipts for purchases like office furniture and computer components. A filing cabinet is a great way to keep all of your records in an organized manner. You’ll want to save your utility bills also in order to calculate how much was used towards your home-based business. Remember when you work at home on the computer, using computers as a deduction you will deduct a percentage per year since they depreciate throughout the years. A good accountant can help you with all of these intricate details.

In order for your home-based business to be successful you must make sure you have certain key elements in place before you begin and organization is definitely one of those key elements. No one wants to be in the position of sorting through a pile of papers in a box come tax time. Take the time now to set yourself up properly and set yourself up for success!

Author - Harold Reisner
http://www.SummitGlobalGroup.com
Home Based Business Success Coach & Mentor

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April 15th looms in front of most people every year like a big, full moon full influencing a tax based frenzy, but knowing where to find tax breaks for your home based business can make that frenzy a little less frantic and more beneficial to you and your home based business. Finding tax breaks for your home based business is not overly difficult, but make sure you discuss tax breaks for your home based business with the person doing your taxes.

A great way to find those tax breaks for your home based business is to get information from your local municipality as to what fees you will have to pay and what the available tax breaks for your home based business are available. They may even be able to tell you what forms are required from the state in order to make sure you get tax breaks for your home based business rather than fines for not filing the right paperwork. Understand that to optimize the tax breaks for your home based business, you should make sure you are structuring your business in the best way. Filing your business as a sole proprietorship, partnership, or corporation can have a definite influence on the tax breaks for your home based business. The Department of Revenue should be able to offer you more information on how to file, along with fees and available tax breaks for your home based business.

Understand, too, that working for yourself may not just be about tax breaks for your home based business. There are taxes that your will have to pay, like employment taxes, federal income taxes, and social security taxes that are required, although there are many tax breaks for your home based business that can offset some of these taxes you will have to pay.

In most cases, there are tax breaks for your home based business that are just like those available for regular businesses. Tax breaks for your home based business will allow you to deduct thousands of dollars in household items. For instance one common area of tax breaks for your home based business includes automotive expenses. By deducting your mileage, car payment, and automotive maintenance fees, you are getting one of many tax breaks on your home based business. Other tax breaks for your home based business can include travel expenses, computer and office supplies, a portion of your home’s property taxes, entertainment expenses, and even health insurance expenses.

Read the rest of the article here: Where to Find Tax Breaks for Your Home Based Business.

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Copyright © Charles Fuchs is an established Six Figure Income earner and one of the top online marketer’s. He specializes in
helping people start their very own Work at Home and Home Based Business on the internet.

I grant permission to publish this article, electronically or in print, as long as the bylines are included, with a live link, and the article is not changed in any way.

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I don’t claim to be an accountant, nor very well versed in the art of creative tax preparation, but I do have a bit of experience in handling the day to day and month to month taxes. For the past five years, I have learned first and foremost that the most important thing in business is to keep accurate records for tax purposes.

I always dread the end of each physical year when it’s time to do the annual tax returns. It can be quite overwhelming for a beginner, but don’t be scared… the IRS is very helpful in getting you on the right track and providing information to help you get through all the forms with a minimum of hair loss.

If you will be generating an income from your business, (which is your whole purpose right?) you will need a federal tax ID number so the tax guys can associate your business to your name. This doesn’t sound like much fun, but believe me, it’s better to do it right the first time around than to have to deal with them after they discover that you have been running a business and not claiming your income on your taxes.

You can get all the IRS publications on how to get your Federal Employers Identification Number (FEIN) from http://www.irs.ustreas.gov/ which will also provide you with a wealth of information regarding business startups, record keeping and and tax information.

You will need to get a state sales tax identification number. This number is to identify you and help you keep track of your sales tax. You will need to charge a sales tax on tangible items that you sell. Sales taxes are based on your geographical location, so you will need to know what your state sales tax rates are and what the policies are for your particular state on sales tax and taxes on services. You can contact your local tax agency for assistance.

There are significant tax savings for those who are running a home based business. You are entitled to certain credits, deductions and allowances. In order to claim these savings, you must first and foremost keep accurate records of the daily workings of your business.

Since you will be “self-employed”, you will be responsible for paying your own income tax, social security and medicare as well as any employee taxes if you have any employees. Property tax and sales tax are also your responsibility to report and pay them in a timely manner. Failure to do so could result in some pretty stiff fines.

The IRS provides publications which are very helpful for starting a home based business. It would be a good idea for you to call your local IRS office and request their business startup package. They are more than happy to send you anything you need to start your business off on the right foot when it comes to taxes. I personally recommend the following booklets along with the startup publication:

Tax Guide for Small Business (Publication 334)

Business Use of Your Home (Publication 587)

Self-employment Tax (Publication 533)

Tax Withholding and Estimated Tax (Publication 505)

These booklets will provide you with all the necessary details to get you started. It will also contain a list of other publications that you may find useful and will guide you through the necessary steps for getting right with the IRS.

Every transaction your business makes, will have an effect on your taxes. You make a sale, you will owe sales tax in most cases. This tax is reported monthly on a form ST-1 which will automatically be mailed to you prior to the end of each month once you have established your state sales tax ID number. You will also need to check into industry specific taxes. For instance, I have to file a quarterly ST-8 for my husband’s business, which is a Tire Tax form in which we must collect and pay a “use tax” for any tires that are sold.

Home based businesses also have certain tax advantages. You may be eligible for deductions such as a portion of your mortgage interest, auto expenses, phone expenses and depreciation for equipment such as your computer. Other tax deductions are for items such as certain membership fees related to your business, postage, software used for your business and copying and reproduction costs such as business cards and flyers.

Dealing with business taxes can be very intimidating if you’ve never done it before but it doesn’t have to be. Most tax agencies are very helpful in answering your questions and helping you get the proper forms. If you make a mistake in your tax forms, don’t worry — the tax agencies will find the mistake and correct it, but it’s best to make sure you get it done right to save any penalties incurred if mistakes are found by the tax guys.

Kim Haas is a WAHM and Founder of Womans-Net.com, a popular online networking community focusing on working from home and women in business and owner of http://Article-Host.com. To learn more about Kim, visit http://kimberlyhaas.com
Copyright 2005 Kim Haas

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