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Tax
Tips for the Home-based Business Owner |
Tax season
is one of the most nerve-wracking times
of the year. From putting together all of
the necessary tax documents to finding the
right accountant, taxes can be time-consuming,
frustrating, and a major challenge. Add
in a home-based business and taxes can be
downright overwhelming. However, there are
some things you can do to make your tax
season a breeze.
Choose your
accountant wisely
One of the most important decisions you’ll
make as a business owner is who you will
choose to help you with your bookkeeping
and accounting needs. Research accountants
in your area and look for one that specializes
in small business taxes. Ask if they will
prepare both corporate and personal returns
if needed. Make sure your accountant is
clear on how they charge for their time
– especially for questions over the
phone.
I once worked
with accountants who worked with large corporations.
They were used to having very little contact
with their clients, however with a new corporation
I had many questions about how things worked.
Needless to say it didn’t go well.
Our current accountant specializes in small
businesses and is available by phone or
email if I have a question.
Set up your
business accounts properly
I was told early in my business career that
I must make sure to keep my business accounts
and personal accounts separate. When I first
began running my own business I simply added
a second checking account to use for business
purposes. There was no cost to do so I was
able to set my income aside in this separate
account.
I also set
up a savings account to set aside my taxes
each month. This was a big help at the end
of the year knowing that all of my taxes
were set aside and I could relax instead
of scrambling to come up with the money.
Keep good records
Another way to keep tax season stress-free
is to keep business receipts throughout
the year. I keep a separate file in the
filing cabinet next to my desk just for
this purpose. This way I have everything
in one place when tax season arrives. If
you don't have room for a filing cabinet,
consider an expandable folder categorized
A – Z. That way you can still divide
up the taxes by topic, and won't have to
do that come tax season.
Keep records
of your business expenses throughout the
year. Request a list of items from your
accountant or tax professional, so that
you will know what items to track. Be sure
to ask what counts as “business expenses.”
There are certain deductions that you can
take for your home, car, and utilities.
Consult your tax professional about these
deductions.
Know Your Tax
Facts
It's important to know the date that your
taxes are due. Many S corporations are surprised
when they discover that some of their tax
forms need to be filed by March 15th and
not April 15th. Another surprise to some
home-based businesses is that if you pay
subcontractors over $600.00 a year, you
need to send them a 1099 by the end of January.
There are many
places online to find more information about
taxes. One great place to find more information
is the Internal Revenue Service (IRS) website
at www.irs.gov. They have sections with
helpful information on both personal and
business taxes. They also list contact information
for local IRS offices where you can also
find help.
Don’t
ignore the taxes involved with running a
home-based business and hope it will all
work itself out. It takes planning and effort
to be prepared for tax season. Do your homework
when it comes to taxes and find an accountant
that you trust to guide you through the
tax maze. With the right preparation and
help your tax season can be stress-free.
ABOUT THE AUTHOR:
Jill Hart is the founder of Christian Work
at Home Moms, CWAHM.com. Hart is also the
co-author of the upcoming book, Home Based
Blessings, due out in early 2007 for Christian
moms who want to work at home. Hart and
her husband, Allen of CWAHD.com
(Christian Work at Home Dads) reside in
Nebraska with their two children.
Free for reprint as long
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