A big advantage of working from home is the tax benefits of operating a home based business. Working from home allows you to deduct portions of bills that you are already paying to live there. You can deduct home expenses if you actually work in your home. It is easiest to do this if you have a room set aside for your business.
Measure out how big that room is in proportion to the house, and you can deduct expenses using that percentage. For example, if your place of doing business takes up 5% of your house, you can deduct 5% of your heating expenses for the days you work. (In other words, if you don't work weekends, you can't deduct for weekends.
) You can deduct items such as mortgage interest (though not your mortgage itself), electricity, telephone, insurance, and expenses for maintenance and repair. In general, you can deduct the portion of expenses that directly relates to your business. You can deduct costs for your internet service provider in proportion to the amount you use it for your business, too.
If it's used completely for business you can deduct it all, but be certain before you do this that you are not using it for other reasons. Having a CPA do your taxes for you has major benefits. They have computer software made up by tax pros and former IRS workers that you wouldn't ever be able to use unless you went through lots of accounting training.
Be 100% honest with your CPA about everything. If you are called in for an audit your CPA will tell you to say nothing but your name and your CPA does all the talking. The IRS has to find mistakes not you. If a CPA does your tax you will get deductions you would never know to take and your CPA will also take away deductions you cannot legitimately take. A CPA will cost you more but will get you much more back.
Tax filings done by CPAs are far less likely to be called in for audits because the IRS knows the CPA's reputation is at stake with every tax form filled out and so the CPA will be very careful that every little detail is done correctly. Keep a separate notebook for tax deductions and on each page make a heading for all possible deductions like advertising, supplies, repair parts, phone, computer, etc. and write them down and save ALL your receipts in a separate large envelope.
Write your deductions in this notebook, everyday, as they happen. Remember, your tax preparation is a daily, year round effort and is an important part of your business. Write everything in your notebook that could be a deduction and then at the end of the year let your CPA decide what is and is not a deduction. He or she knows and you don't.
It is their job to know. This way you won't miss out on any deductions you don't know for sure on and you won't take any deductions you don't have coming. Pretty neat huh? You will get a lot bigger income tax refund this way and have a clear conscience you did all the right things and you will not have any worries about a scary IRS audit.
Talk over with your CPA what he thinks about the way you are keeping records and learn from him or her better ways to do it. They will usually have valuable tips for you to help you run your business better. This chit chat at the end of your tax preparation is invaluable to you. The tax benefits of operating a home based business enable you to deduct things you would otherwise be paying in full.
If you are considering a business from home, it's a good way to lower your costs. This is just one more advantage of working from home. Source: http://www.irs.gov/faqs/faq-kw82.html Plus my own life business tax experience of over 40 years.
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