The Newest Business Reviews
Most Popular Business Reviews
Highest Rated Business Reviews
| Are You New to Business? |
 |
 |
 |
|
Did you know that you could be making money each year through your home? With the current trends, icommerce and the Internet it is becoming easier. It still takes some effort. but depending on your skills, it might be easier then you think. Many people have the skills already to network and run business but it isn’t difficult for you to catch up either. While it almost sounds too good to be true, it’s not! The government offers huge tax breaks to those who have home based businesses - regardless of how well they do. How is this possible? The tax laws that allow large corporations to write off thousands of dollars in expenses are also available to those with home-based businesses. The only difference between most home based businesses and fortune 500 companies in the eyes of the IRS is their size! As a Home Business in fact, you can also deduct many home office and other expenses. As an independent consultant, you can take advantage of many more tax deductions for business expenses than a regular employee can. The IRS taxes the net profits of businesses, rather than gross income, like it does for employees. Your profits, by definition, don't include the money you spend for office equipment, supplies, advertising, business-related travel, etc. Take care, though. This extra advantage can also be tricky, as the line between personal and business isn't always clear. Talk to your accountant whenever you have a question. Let’s take a look at some of the seemingly “ordinary” things that can be legally deducted by a home based business owner. But before we get started, it is important to find a solution that works for you! Of course in any business, your intent is to make a profit as soon as practical. Meals and Entertainment When you discuss business with co-workers and friends at lunch or dinner, your meal is 50 percent tax deductible. For that matter, so are other expenses relating to entertainment focused on building relationships with prospects, retail customers, and business partners (downline or upline distributors). Theater and sporting event tickets are 50 percent tax deductible, too. Travel When you travel a fair distance from home you might be able to deduct much of your trip even if you spend time relaxing. There are rules that need to be followed but if a majority of the time is spent on business it should be fully deductible. If you spent one day traveling, on day in meeting or distributing information on your products and services, another day traveling back – you still might be able to get two day to relax in between. Car and Fuel Automobile mileage is deductible between your home-based business office and a meeting where business is discussed. That includes the meals mentioned above, an opportunity meeting, or even golf outings with friends who are prospects! Travel is deductible, whether it’s to an industrial center or an island resort, if the purpose is to hold an opportunity meeting, to discuss business with other travelers, or to attend a seminar. Travel is deductible for a wife or husband whose presence is helpful in closing the sale. You can also deduct wages paid to your children for help in the business, and if those children have no other sources of income, all wages under $4,000 per year are tax-free. It’s a great way to save for college with Uncle Sam’s help! Computer and Office Equipment Home computers, fax machines, telephones, office supplies, and office furniture are also fully tax deductible. But there’s more. The IRS’ only requirement is that you legitimately treat your network marketing business as a business, not a hobby. That means regularly working it. What counts as “regularly working” your business? Taking the actions you are telling your downline to take: attending weekly meetings, calling prospects regularly, using the product and telling people about it, presenting the opportunity, and teaching others to do the same. If the people you sponsor actively follow your guidance, they should make money. But even if they don’t, the IRS will recognize their right to home-based business tax breaks (just as it does yours) if they properly document their activities and costs. The only catch is that expenses directly related to your home office (rent, utilities, etc.) cannot be used to generate a tax loss. They can only count against your business profits for that year and carry over to negate profits in future years, should your business take off. Required Documentation Documentation is a simple process. It merely means saving receipts and writing down in your day planner all business-related activities, business-related expenses and any revenues you earn. Consistent record keeping will prove to the IRS that you are truly running a business and not engaged in a hobby, whether or not it makes money. What do these records look like? They’re simple. Just writing down whom you spoke with about the business, where you went in pursuit of your business, and what you spent in the ordinary course of conducting business, will provide you with the proper documentation and a sea of deductible expenses. For a maximum investment of five minutes a day, the time spent record keeping is worth a minimum of $5,000 in tax savings. That’s a little over $231 per hour of tax savings for the time you spent keeping track of your activities and expenses. Which of your ordinary lifestyle expenses are deductible when you are a home based business? If you legitimately work your business in any of the following ways, you can write it off. Check with your CPA and make sure your goal is to be profitable in the long run! Lunch with coworkers is deductible. Hey, they’re prospects if you talk about your products and business! Travel expenses for you and your spouse to a potential vacation location, if you hold opportunity meetings (the meetings could be with the friends you are visiting), and if both you and your spouse participate. Home-office deduction for use of the spare room in your house, out of which you operate your home-based business. Make sure to meet there sometimes with clients or prospects, to document the meetings, and not to use the office for any other purpose. Automobile mileage from your home office to your day job or other places where you actively encounter prospects and actively discuss the product. At 42 cents per mile it adds up fast. Tax-free wages for two kids without other jobs who help in your home-based business. That’s two children times $4,000 per year, paid to accounts for college, weddings, etc. Health insurance for your family. (This assumes your spouse is an employee of your home-based business who chooses to include you and the kids on the plan.) Remember: To deduct the above expenses, you must be actively working your business (i.e. meals and trips mentioned above) intending to make a profit and keeping records. Be sure to consult your accountant or tax advisor to learn more about applying these concepts to your business. |
Donate
Quick Links
|
