Running your own business is not easy. The hours are long, the work is difficult, and the clients and employees are a story for themselves. So, in other words, you need every break you can get, and any mistake you make should be minimal. That’s where keeping your taxes in order comes in. A simple concept really, it’s just common sense. And yet everybody does their taxes at the last moment, skims through the paperwork, and basically does it only if they have a metaphorical gun to their head.
But handling your taxes for your home business can not only save you from possible headaches but can even get you benefits and write-offs. Below you can read some advice on how to get your home business taxes in order. And note that these, of course, vary from country to country, and from region to region, but the core ideas of this article are pretty universal.
You are eligible for a workspace write-off
One of the first things you can do is write off your home office. If you are in the line of work that allows and necessitates that you are constantly in the same room every day, then you can write it off. You can also write off a part of a shared room, the rules are pretty much similar. Namely, the space you are using is calculated as a percentage of your home’s total area. Then you apply this to the utilities, costs, insurance, rent… Now, of course, you must be honest. Don’t fudge the numbers, and don’t include things like fancy paintings or artwork that you don’t really need.
Getting a proper tax depreciation report done can also show just how much money you can actually save and write off. It can essentially present to you by how much you can lower the amount of taxable income you have.
Don’t forget about your retirement
Don’t forget to pay into your social security and your health insurance, however, know that you can get a certain amount of contributions you pay in reduced, while still keeping the same results. You can fund your own retirement plan specialized for self-employed individuals. Know that getting a good accountant can always help you a lot.
Keep a journal
Audits are no joke, and they happen. Still, if you are honest, and have kept your books in order then there’s nothing to worry about. The last thing you need is to get audited without any record of your business dealings. Essentially keeping a daily log of your home business activities can save you from any unnecessary unpleasantness. So, write down receipts for the paper you bought for your printer, do the same for your phone calls, mileage, and any other payments made by your home-company.
Business trips, not vacations
Now, we’re not saying that you should lie when reporting this kind of things. But just because you’re having some fun on a trip that is all about networking and professional self-improvement doesn’t mean it can’t be considered a business trip. On a business trip, all your travel expenses and some percentage of your food percentage are tax deductible. Just remember to justify these expenses properly, keep receipts, tickets, seminar invitations, and mileage tracking records after your trip is over.
Don’t just pay, employ
Many home business owners have family members who take part in their business. They provide their services and then get paid. However, what people forget to do is to actually employ, not just pay, their family members and friends. What we mean by this is that it can actually be cheaper, tax-deductible, and carry many more benefits if you fully employed the people that are helping you.
Get your office set up
Know that getting new office furniture, a new laptop, software, printers… is tax deductible. Of course, there is a limit to this, and the things you buy must be used regularly (majority-usage) and be actually directly useful for your business. So, a new laptop and office chair is ok, but a widescreen TV not so much.
All the rights and obligations surrounding taxes fall onto your home business as much as they would on any megacorp. Now, the obligations part is pretty obvious, but people forget just how much they can write off, and how much assistance they can get.