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The Living Library
of
Internet Marketing News

Published by Compulist Services
Shelf No. 67


Hang On To What's Yours!

You can save a lot of money if you understand what
the acceptable tax deductions are for operating a home-based Internet business.

by Esther Smith


This Article is not about loopholes or gray areas in the law, but rather acceptable tax deductions for the self-employed Internet Home Office. And almost every decision an Internet business owner makes has tax consequences that can affect the bottom line of his/her year-end profit.

Therefore, considering this is not something you do in April, but something you should be doing all year round, this article will only focus on a few tips for your 11th hour tax savings. Qualified attorneys and CPAs are always advised in your final tax preparations.

So, congratulations on starting your home-based business. Hopefully your efforts have made some money during 2003, and you are looking for some tax deductions. And, let’s dispel the myth right now that doing so always leads to a Tax Audit – not so!

Did you know that women in the U.S. now start businesses at twice the rate of men? I just had to mention that… ;-) However, they are prone to numbers phobia! So they will be comforted by these facts:

      As long as you don’t have any employees, filing for a separate tax id number with the IRS for your business is probably not necessary.

      Cash-basis taxpayers use cash receipts (same as checks or credit cards) and disbursements as their method of keeping up with daily business. TIP: Keep a separate credit card for business purposes only.

      Using your car for any part time "business" purpose allows specific deductions. The simple solution is to use the standard mileage rate; but you must keep a contemporaneous mileage log even if it’s a quick trip to Staples for supplies.

      IRS Publications 583, 1066 and the IRS Small Business Resource Guide 2000 (and updates) will tell you all you need to know about giving Uncle Sam his due.

      If you have not incorporated, or established a partnership or limited liability company, your fiscal year will begin January 1st and end December 31st.

Qualifying your home-office for proper deductions:

      You must be using this portion of your home exclusively and on a regular basis. Exclusively means "only for business purposes" and Regular means "on a continuing basis"

      You have no other fixed location where your business activities are conducted.

      The square footage of your "office space" along with the percentage of heat and electricity.

      The difference between hobby and business: Refer to the Federal Tax Code Section 280A, but in general terms a "business" is profit first, pleasure second. A hobby is the reverse.

Qualifying your business purchases for proper deductions: The rule of thumb here is this – is it something you would do or buy anyway? If your answer is "yes", you cannot deduct it – if your answer is "no", you can. So if the business deduction is usual, ordinary, necessary, etc. than Congress permits the deduction. I cannot deduct dog food, but our local Humane Society can.

But things like toner, paper, pens, pencils, erasers, file folders, calendars, and even special programs like Excel, Lotus, etc. are deductible items for the home-based business. The caution here is ---- take what is real.

David Meier, founder and COO of Business Development Coaching, provides small-business owners with ongoing knowledge and support required to become truly successful entrepreneurs. He lists the general deductions as:

  • Your Home,
  • Your Car
  • Your Equipment
  • Your Travel and Entertainment
  • Your Retirement
  • Your Family
  • Your Self

In qualifying your home-office business deduction, you either qualify or you do not. There is no partial qualification available.

Of course this information is general in nature, and not meant as legal advice warranted or guaranteed. Because laws change over time and in different jurisdictions, it is imperative that you consult an attorney in your area regarding legal matters and an accountant regarding tax matters.

But I hope some of this information has given pause for next years tax savings.

 

About the Author: Smith writes numerous articles and publishes a weekly syndicated Newsletter.  She also coaches new students every day to leave the time-for-money trap and set up Leveraged Income for life.

You can’t get back your hours but you can stop giving up more of them.  Start young, retire early.

Download My Free eBook Now
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Be sure to bring your party pants!

This invitation is extended to the 95% who have failed to find any real wealth on the Internet. All of your efforts have been a long line of dream stealers and the road has been tough, I know. Solo all the way and more often than not, the training you were promised was in poverty and patience.

But bless you – you’re one of the few people who is willing to do more, be more and get more out of life. You hang on to the belief that it can’t be all Internet lies because you’ve seen too many success stories. Like me, you get A+ for persistence!

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Stay close beside me as we do some me-and-you marketing and make yourself some really, really awesome income. We’ll do all the hard work upfront, and then as we move into leveraged income I’ll teach you how to coast.

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This time you will join the 5%
all wearing party pants!

Esther Smith
Author/Publisher of "The Permanent Venture"

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