Don’t Let Taxes Kill Your Home Based Business Dream!
One of the biggest business killers for any new home business is taxes. We may be the best at what we are doing as it relates to the type of business we are operating, but in many cases that’s where our experience stops. Remember that information is power and the most effective way to understand how taxes can hurt you is to educate yourself. Yes, you can take the easy way and hire an accountant, but if you don’t get your own education on how taxes can affect your business my guess is that you will still be flushing cash down the toilet.
One of the most important things that any new business owner can do is to treat every expense receipt they get just like if it were cash. Remember that you are permitted to deduct almost any expense you have that is related to the business. Depending on the type of business expense that receipt may be worth significantly more and in some cases as much as fifty percent of the original expense. Therefore, carry something with you everywhere you go that you can safely place these receipts. In addition, if the receipt is for food, make sure you make a comment about the reasons you are eating because not all meals are deductable, i.e., lunch with a potential client and name of the client.
If your home business requires you to drive your personal vehicle it is extremely important to break out the miles driven for business from what is personal. Place a mileage log into your vehicle and get in the habit immediately of logging in every trip you make for business. This log should include information like, the date and time, the starting location and odometer reading, every stop you make, and the end location and odometer reading. In addition, it is important that you make a comment about the purpose of the trip so that you can recall it if it is ever questioned. If you don’t have a log it will be very difficult to provide proof of how you separated out business trips from personal ones. The other mistake many new home business owners make is that they try log in every trip they make and try to claim them as business. Don’t do this. It is wrong, and if you are audited by the IRS the auditor will quickly see what you are doing and then question every other expense you claim.
Again, every legitimate expense is deductable in some amount. As an example here are just some expenses that are deductable, advertising and marketing, business related meals, office supplies, cellular telephones, computers, internet fees, portions of your home used for the business, legal expenses, professional expenses, equipment depreciation, portions of your home utility bills, and many more. The key is get in the habit of keeping your receipts in an organized way making as many comments as possible so that you can recall why it is a home business expense.
The important thing is that you educate yourself before you ever begin and don’t allow taxes to kill your new home business idea.
