When Tax time approaches, home based business entrepreneurs start filing their forms having two fears in mind. First, their business is going to be audited and second they would have to pay a lot as taxes. Reality is that there is not much to be afraid of.
First of all, audits rarely happen. And, suppose even if your business is audited out of the odds, you can pass it easily if you keep good records and maintain receipts. You have no control whether you would be audited or not, but you have a control over what amount you are going to pay as tax each year. You need to know all the deduction possibilities from which you can benefit to take tax advantage.
You business vehicle can serve as a tax saver for you. Most of us know we can use our personal car as a tax write-off if we use it for advertising. What is new is business vehicle can also be a tax saver. Whenever you drive to someplace for any domestic purpose, that mileage can be claimed as a tax write-off. Even if you take a stop for a personal purpose, like dropping your child to school, the mileage can be claimed in taxes. You can also claim other vehicle related costs like fuel, insurance, or parking fees in your taxes. You need to keep a record of the mileages on a notebook and keep the receipt of fueling or parking expenses.
If your family members work for you, and you pay them an allowance, that amount can also be a tax write-off. As salaries are not a part of profit for any business. This goes for home based businesses too.
It is very common for home based entrepreneurs to hire their own family member, often children to help them in small business chores. It is best to pay your family members working for you via check from your business account. It will make it easy for you to keep a record and claim it in taxes.
Normally, businesses deduct the rent amount, equipment’s costs and other expenses from their taxes. Being a home based business owner, it is very likely that you have set aside a space as your home office. So you can write-off an appropriate amount as rent for your home office.
How you determine the rent amount is simple. Find out what percentage of your house area is your home office. Find out the house rents in your surroundings. Apply the percentage and you know your home office’s rent amount.
You can deduct a share of your utility bills for power, telephone and water from you taxes. Your equipments like computer, fax machine, printer, cell phone, etc, all are tax deductibles.
Just keep all the records and receipt together to make tax deduction claims. Now you know that there is nothing to be afraid about the tax time. If you keep thorough records, you can benefits from various tax deductions and reduce your tax bills each year as well as remain prepared to face an audit.
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