The Tax Guide for the Home Business

Copyright (c) 2010 Kathy Pleasance

Stop delaying, there is no avoiding the tax man. Get yourself organized now and life will be a whole lot easier come tax time.

Keeping good records, verifying every entry is the key to successfully claiming all the home-based business deductions to which you are entitled. With starting your home business you most likely are a little intimidated with having to submit a tax return and the chance of getting audited. Simply follow these guidelines and rest assured that filing your next tax return will go smoothly.

Get yourself an accounting ledger booklet. To be really simple create an excel spreadsheet and label two columns expense and income.

Franchise Expenses: Be sure to claim any monthly affiliate costs.

Phone Bills And Internet Access: Are you using a special phone line or have internet in your home or office that you are using for business, then save all those monthly bills. These items are business expenses and may also be written off.

Long Distance Calls: Making long distance calls for business is also a deduction, make sure you keep the phone bill with the amounts charged. If these calls are related to your work, the cost of the calls may also be written off in most cases.

Business Supplies: Save all receipts from supplies used for your business. Any items such as paper, ink cartridges, folders, business cards that you purchased and use for your biz.

Computers: If you purchase a new computer for business use, the cost of the computer may be claimed. Depreciation for 3 years on your business computer may also be claimed.

Postage: Postage and shipping fees are often forgotten and should be claimed.

Advertising: You can claim most advertising on your taxes. Keep all receipts for any newspaper ad's you may run, or any advertising you do online. Advertising is a business expense and in most cases can be written off.

Labor Expenses: All salaries that have been paid to friends, children or others for work done are a deductable expense. Make sure that payments are reasonable to avoid any problems in case you are audited.

Utilities: If you have an office where you conduct your business you will be able to deduct some of the utilities expenses. This is great because I need these things regardless of have a home business or not, now they can be used as a tax deduction. Allowable deductions range from garbage pick up, long distance calls, electricity and gas. Keep all payments, receipts on a spreadsheet or in the accounting ledger.

Entertainment Expenses: I don't have too much to deduct in this category, but several times a year I will meet a potential client over dinner. Dinner expenses often get overlooked, keep track of them to -include the tip...this is all deductible also.

Car Expenses: Keep track of your mileage, keep a spreadsheet in the car and anytime you are using it for work, write it down.

Education: If you attend conventions, conferences, trade shows, any software costs, web or journal subscriptions may all be claimed.

Travel: The percentage and eligibility of deduction depends on whether your trip was deemed to be business-related exclusively (100 per cent) or partially (50 per cent). Best to keep receipts and discuss with tax advisor.

Income: In addition to all your deductible expenses, you will also need to keep track of any money that you make with your business.

In closing, keep good records, verify everything with copies of all bills, paystubs, a mileage log for the vehicle, etc. If you are ever audited, you will have your information organized and ready. Total up each category at the end of the year and take the entire booklet or excel sheet into your tax preparer.

Every business takes time to become successful, don't give up, it takes time.