.: Tax, Tax And More Tax. What A Bummer! Here's How To Handle It.
By:Sam Weston
Category:Home / Finance / Taxes
When you run a business, it can feel like you spend far too much of your time worrying about tax. Here's a quick guide to the what you need to know about tax.
What Do You Qualify For?
There are all sorts of tax breaks for home and small businesses, to try and make it easier for them to survive. To qualify for them, though, you will need to be using your home as the primary place where you do business. If most of what you do takes place in some space elsewhere that you rent, then you won't qualify for home business tax rules. You also are unlikely to qualify if you haven't set aside a specific part of your home as the 'business area'. Be prepared for the fact that you might be audited, to make sure that you are running a legitimate business from your home.
Records You Need to Keep.
You need to keep records of everything -- literally everything -- you spend on your home business. You should especially keep records of things when their use might be shared between personal and business, such any business-related travel expenses you run up on your car. If you have stock, you need to go through and inventory it at least once a month.
What You Can Deduct from Your Home Expenses.
Because your home office is in your home, you can claim any tax back that you pay on that part of the home. You can also claim back tax on part of your utility bills. For example, if your home is 2,000 square feet and you use 100 square feet for your home office, you can claim back 5% of your utilities. If you rent, then you can claim back this percentage of the rent, and if you have bought the house then you can claim it as a discount off your mortgage interest. Any equipment you have that depreciates (becomes worth less) because you use it in your business may also be eligible for a tax deduction.
Self-Employment Taxes.
When you work from home, you are legally self-employed. This can put you in a sticky situation, meaning that you have to pay for medical and other taxes that your employer would normally pay for you. In the US, for example, you will be responsible for your own social security and Medicare payments, while in the UK you will need to pay national insurance.
Get Tax Software.
If you're not sure where to begin, get some tax software. Choosing your circumstances from its lists and giving any additional information it asks for should show you most of the tax rules that apply to you.
Get an Accountant.
If you want to save as much as you can on your taxes, don't rely on things you read on the Internet, or even on computer software -- get an accountant. They'll be up-to-date with all the latest tax laws, and will know thousands of tips and tricks that there's no space to list here. See if you can find one who will take a percentage of what they save you in tax as payment instead of charging a flat fee -- this is an ideal solution for you and for them.
Do Your Taxes Online.
Most developed countries now give the option to do your taxes online, eliminating a big paperwork headache. You may even find that your tax software can send its tax report directly to the online service, without you doing much more than clicking a button. Of course, if you do things this way, be sure to call and confirm that everything went through alright.
Don't Be Late.
Whatever you do with your taxes, you absolutely must not file them late or pay them late. It's an all-too-easy trap to fall into, but there are automatic fines. Tax collection agencies will look upon you very unfavourably if you pay late, and are likely to start immediately charging interest on any money you owe them. Write your tax dates on your calendar and underline them in red. Twice.
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.: New Taxes Articles
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Here are 6 top tax tips you should read before April 15. These tips can save you money. Utilize these tips and you will likely complete your tax returns on time correctly with less stress and have better chances of earning greater tax returns.
2). Home Based Business Tax Deduction Topic - Home Office
If you are self-employed and run you business from a space in your home, you may qualify for a home office tax deduction. This article will cover the requirements to qualify for a home office deduction.
3). Home Business Tax Savings - Business Travel
If you have a home business that requires you to travel, either by plane, car, or train, then you have additional tax deductions you may qualify for. This includes but is not limited to the cost of airfare, meals, dry-cleaning, and hotel/motel expenses. This article will cover the rules and requirements so you can claim these deductions on your 2006 tax return.
4). Home Based Business Tax Deduction Topic - Vehicles
This article will cover vehicle related deductions that often get overlooked by home-based businesses. Our focus will be for individuals with no employees, however many of the deductions will apply to small business and large corporations as well.
5). Tax Considerations When Re-Financing
For many homeowners the overall goals of re-financing are often paying less in interest overall and reducing monthly payments.
6). Get Tax Help From The IRS - It Can Greatly Help You
Tax help is important for most of us, because not everyone is an accountant. There are many ways a taxpayer could go about obtaining tax help and some of these avenues will save you money.
7). Get Tax Help To Avoid Getting Caught In A Financial Mess!
It has been said that there are two certainties in life, death and taxes. While you can do nothing about the first there is all kinds of help available when it comes to paying taxes. Getting the right kind of advice is crucial if you are to save at least some of your dollars.
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Capital Gains tax is a federal tax penalty that is imposed on capital accumulation, investment and productivity. Some of the income that is subject to capital gains tax includes the sale of an investment, a home, a family business, a farm or ranch or even a work of art. The capital gains tax is applied on the difference between the price paid for an item and the money received from selling it, or the capital gain.
2). Three Dumbest LLC Formation Mistakes
I see a lot of dumb llc formation mistakes. Maybe more than most people because I occasionally teach a graduate tax class on LLC formation.
Some of the mistakes are made by entrepreneurs and investors trying to save money on accountants and attorney fees. And I guess that’s okay--albeit penny-wise and pound-foolish.
But you know what really irks me? Some of these mistakes—in fact, most of them—are made by attorneys and paralegal services… Professionals who should know better.
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If number crunching, math skills and organization are your strong points, the profession of accounting may be for you. Here is a primer on how.
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5). Tax Deduction – Meal Per Diems
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At least that is what the letter from the IRS says. First thing, don’t panic. Quoting Daniel J. Pilla’s study for the Cato Institute “About 40 percent of the revenues the IRS collects through penalty assessments are abated when citizens challenge the penalties.”
So we now know the odds are good that the IRS is wrong or will blink first.
7). Strategies For Limiting Taxes If You Are Your Own Boss
Self-employed individuals always cringe at the amount of taxes the pay to the IRS and state. Here are tax strategies for self-employed individuals that reduce those tax amounts.
Strategies For Limiting Taxes If You Are Your Own Boss
The good news is being self-employed is one of the best tax strategies out there. Unlike a salaried employee, the full scope of tax credits and deductions available in the tax code are now available to you.