03.10.09
Posted in Taxes at 10:18 pm by Diana Heeb Bivona
The home office deduction is one of those deductions that can potentially get you in to a lot of trouble if not handled correctly. Therefore, the best place to start is by making sure your home office fits the definition of a home office per the IRS. You can claim this deduction for the business use of a part of your home only if “you use that part of your home regularly and exclusively (1) as your principal place of business for any trade or business OR (2) as a place to meet or deal with your patients, clients or customers in the normal course of your trade or business.”
Another important thing to keep in mind when dealing with the home office is that the burden of proving it is a home office — used solely and exclusively as a home office – will be on you if the IRS demands proof.
Now, here’s the good news. Your home office does not have to take up an entire room. The key is that it is a space devoted exclusively to your business. To figure out just how much space is deductible grab the tape measure. After you have measured your dedicated work space, divide that by the square footage of your home. That is the figure you will use to calculate your home office deduction.
Remember that your deduction will be limited if your gross income from your business is less than your total business expenses.
Next up….the social security deduction.
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03.07.09
Posted in Taxes at 12:05 pm by Diana Heeb Bivona
It’s that time of the year again. The time where we scramble to put our financial records in order, stock up on the Excedrin and say a special prayer to the tax gods to be kind to us. Given its that special time of year, it may be a good time to review a few important tips for small business owners. So, over the next week, we’ll discuss that which makes us grind our teeth, pull out our hair and grumble about watching all our hard earned profits being taken away. Taxes!For many of us, particularly during these hard economic times where we are pinching every penny and holding on by a thread, the “urge” to take every deduction out there is strong….really strong. However, I encourage you to fight the temptation! Absolutely, positively, take every legal deduction allowed to you, but don’t over reach and don’t invent.
The IRS has always audited more smaller companies than bigger ones, and all recent indications are that they are targeting even more smaller ones. In fact, word from Washington DC in February 2009 was that the IRS intended to decrease the number of corporate audits it performed and instead audit more small businesses this year. Now, don’t you feel special and all warm and tingly?
Ever been through an audit? Anyone who has would probably considers a run in with an army of fire ants a more pleasant experience. Therefore, if you can avoid one, do so. The best way to avoid one is to make sure you have written documentation for every deduction you are set to take.
Also, make sure that you have completely and accurately filled out the tax forms. That means no missing numbers and no math errors. Fortunately, tax software goes a long way in ensuring many of these potential errors are avoided, but take a few moments to carefully check that return before filing. This may help prevent your return from being kicked out of the automated process to be hand checked by an IRS employee.
Next up…the home office deduction.
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