Authored by Jayant Row in Small Business, Taxes
Published on 05-15-2009
Having your own business and working at home seems to be a dream for many people. This is especially true of those that are hard pressed to earn money and still devote time to raising a family. Or maybe it is just your long cherished dream to make use of your expertise and the bucks that it can get you, while operating from your own office without having to report to a boss.
Now that you have set up that business, remember that your tax situation can change completely. There are state taxes and federal taxes and a whole host of other local and community outgoings that you will have to pay. Do not get overwhelmed by them.
The first thing to do is to get your self enough information about all the various taxes. One good place is the Small Business Association. This is a Federal body and will mainly advise you on federal laws and taxes, but they will guide you on all matters concerning tax and small business itself.
You also need to be in touch with the Social Security Administration if you are planning to hire any employees. They will help you get conversant with any tax issues related to employers. If your business is going to have a fairish turnover, you would be best advised to retain the services of a professional accountant or attorney whose forte is tax issues for business. The fees that you pay will easily be worth it to assist you in getting round all the complicated tax issues that every business seems to attract.
The most important of all the taxes is the income tax issue and here is where you can get advantages of a lot of deductions that small businesses can make while assessing their tax liabilities.
There are al lot of expenses that you as a home based business owner can claim and show as a deduction while computing your taxes. If the business you are into is a franchise, any kits or fees paid to a franchise can be claimed as a deduction. All office supplies and stationery that you use can also figure as expenses. You can claim advertising expenses, including any free items that you give away to advertise your business as part of your deductions. Naturally the phone bills and internet access cost can also be claimed. You would however need to keep bills for all items that you claim for deductions.
Long distance calls made for the sake of business need to be properly documented with details of the call, the duration etc, properly recorded. Did you know that if you are occupying a room in your home, and using it as your business office, you could claim deduction for this also? If you are occupying 15 % of your home as office space, you can claim a like percent of your rental or mortgage payment as a deduction.
Keep a complete log of the trips that you make in your car, and you can claim the expenses incurred for trips you made in connection with your business. It does not matter if this was for buying supplies and even if you did some personal shopping on the way. Postage and shipping costs also qualify as expenses.
There are many such ways that you can help to reduce your tax liability and you would do well to take note of these. It will always help if you are scrupulous in maintaining detailed records of all expenses made, so that your accountant or attorney can easily advise you on deductions that you can claim before paying those taxes.