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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About the author:
Karen Walker specializes in helping individuals, entrepreneurs, network marketers,
and independent professionals generate substantial incomes with their own
Work at Home or Home Based Business on the Internet.
Visit her informational web sites:
Cash Flow Quest |
Work At Home Directory
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