Home business tax tips

If you run a small home based business, there are probably lots of things that you are thankful for. Just the simple idea that you own your business, which you run however you want and that you answer to no one as far as setting up your work hours and vacations. However, you need to keep in mind other important things as well, like being able to take care of your business tax return at the end of the year. Here are some tips to follow that will help you be more prepared around tax season.

Try to stay organized by keeping all records of everything you buy for your business, as well as your earnings and losses in filing cabinets in addition to recording them on your computer. It can be very easy to misplace receipts, bills and any other important financial information concerning your business. Remember not to throw away anything that is business related like utilities bills, property taxes, equipment receipts or any other type of financial importance that you may need for tax purposes. Keep every receipt of purchases for that year and organize them by categories to help you find them in case your accountant or the IRS has questions. Being organized is the best way to be prepared for tax season whether you decide to prepare your own taxes or hire someone to do it for you.

You need to be prepared to prove to the IRS that the specific space you chose in your home along with whatever is inside are exclusively and solely used for the purpose of operating your business and that they are not used for other reasons. You can also claim a percentage of use if you use the area for personal use. You can't claim additional areas of the home as your office. You seriously need to allocate a main place solely for your office and nothing else. If you run a day care center or a preschool from your home, you may be able to deduct many of the costs related with the upkeep of the home. You probably need to be properly licensed by your state first to enjoy the full tax benefits. If that's the case, this is definitely worth the extra effort to obtain your business license, as this exemption will really help you out at tax time. You may be able to deduct expenses like mortgage and property tax payments (or rent if you are not the homeowner), insurance, utility bills and even you computer and software if used in your business. Of course you should only deduct the costs that only apply to your home office area. Everything that you use in your home that supports your business sixty percent of the time can be deducted as well.

All the necessary expenses that you have to spend to start and operate your business are tax deductible. You simply need to show the IRS that you couldn't have been able to stay in business without spending the money on certain things. Furthermore, other expenses are obvious to use as a deduction. Be ready to prove that many other businesses like yours use the same expenses to operate their business. Some other common expenses might include advertising your business on television, radio and making business cards and letterheads, placing ads in newspapers and so on. If you have very complicated business accounting and need to hire a professional to prepare your tax return or to keep your books, these expenses will be tax deductible. If you use part of your car for your business or travel to conferences to improve your skills, these expenses can be used deductions as well as all the furniture in your home office, and the office equipment such as computer, software, printer, copy machine, papers, and telephone.