Tax Tips for Home Based Businesses

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ncluded here are a number of ways for Home Based Business Owners to save money on their taxes.

1. Keep your business home based: Not only will you be at your work place (home) but it will give you opportunity to use your home as your place of business and you will be able to deduct part of it on your taxes. Also, when you work at home you can
arrange your hours to suit you.

2. Divide your income: You can pay reasonable wages to your spouse and children. In doing this you can legally divert income taxed at your higher rate to your family members that are in a lower tax bracket. It not only make sense but it also makes dollars for you.

3. Incorporate Your Business: One of the best things that you can do as a business person is to incorporate yourself. One of the many thing that incorporation will do for you is it will limit your liability. You cannot be sued beyond the worth of your business and you may enjoy lower tax rates on small business income and be able to take other tax advantages as well. Just take it from someone who has been through it,
Incorporation is smart for your business and you.

4. Keep a close account of your expenses: If you are a beginner or a pro, in a homes based business, make certain that you document your expenses. Keep good records, because if you are audited by the IRS you will have to have substantiate of all your expenses. Be sure that you keep a mileage log so that you can prove the percentage of business use you claim for your vehicle? If you have not done so, begin now and keep all receipts for all your entertainment expenses and list the business purpose on the back of each receipt. These are some of the things that if you learn to do consistently will save you a lot of money and grief later.

5. Rearrange Your Affairs For Maximum Tax Savings: These are some questions that you need to ask yourself. Can I make some changes to turn my hobby into a moneymaking business? Is it possible to use that extra room in my house as a home office for my business? Can I arrange to use my car more for business purposes? Can I arrange for more of my entertainment expenses to be business related? I’m sure that the answer to these questions is yes. Talk to an CPA that you trust and they will be able to help you save money and have some fun doing it.


6. Set yourself up on a calendar: It is important that you set yourself up with a calendar and be certain that you file all returns and pay all taxes due (income, payroll, sales, et cetera) on time. You are going to have to pay them anyway, so you can avoid expensive late filing (and payment) penalties and interest. That’s why you need to make yourself a calendar and insert the dates to take care of all these necessary thing. You’ll be glad you did.

7. Develop a Tax Planning Mindset: Some people only worry about their taxes during tax season. However, you will save a fortune in taxes, legally, if you make tax planning your year-round concern. Do you make business and personal purchases, investments, and other expenditures with tax savings in mind? You can and should be doing those things to help you keep more of your money

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