Most people who run a business often feel as if they spend
far too much time worrying about taxes. Here's a quick guide to what
you need to know about taxes.
What Do You Qualify
For?
There are several tax breaks for home and small
businesses that help make it easier for them to survive. To qualify
for these, though, you’ll need to be using your home as the primary
place where you do business.
If most of what you do takes
place in some space outside of your home that you rent, then you
won't qualify for home business tax rules. You’re also unlikely to
qualify if you haven’t set aside a specific part of your home as the
‘business area’. Also, be prepared for the possibility that you
could be audited. Make sure you’re running a legitimate business
from your home.
Record Keeping
You’ll
have to keep records of everything — literally everything — you
spend on your home business. You should especially keep careful
records of purchases that may be shared between personal and
business use, such any business-related travel expenses you run up
on your car. If you have stock, you should keep track of your
inventory at least once a month.
What You Can Deduct
from Your Home Expenses
Since your home office is in
your home, you can claim any tax back that you pay for that area of
your home. You can also claim back tax on a percentage of your
utility bills. For example, if your home is 2,000 square feet and
you use 100 square feet for your home office, you can claim back 5%
of your utilities.
If you rent, then you can claim back this percentage of the rent,
and if own the house, you can claim it as a discount off your
mortgage interest. Any equipment you have that depreciates (reduces
in value) because you use it in your business may also be eligible
for a tax deduction.
Self-Employment
Taxes
When you work from home, you’re legally
self-employed. This means you’ll have to pay for medical and other
taxes your employer used to pay for you. In the US, for example,
you’ll be responsible for your own social security and Medicare
payments, while in the UK you’ll need to pay for your own national
insurance.
Get Tax Software
If you're
not sure where to begin, you might consider using tax software. You
choose your circumstances from its lists and give any additional
information it asks for, and the software will show you the tax
rules that apply to your situation.
Get an
Accountant
If you want to save as much as possible
in taxes, it’s probably best not to rely on what you read on the
Internet, or even on computer software — better to get yourself a
good tax accountant. They’ll be up-to-date on all the latest tax
laws, and they’ll have lots of tips and tricks that that will save
you a lot of taxes.
Do Your Taxes
Online
Many countries now give the option of doing
your taxes online, eliminating a big paperwork headache. You may
even find that your tax software can send your tax report directly
to the online service without you having to do anything more than
clicking a few buttons. Of course, if you choose this route, make
sure you call and confirm they received your
submission.
Don't Be Late
Whatever
you do regarding your taxes, you absolutely must not to file late or
make late payments. This is an all-too-easy trap to fall into, but
there are automatic fines. Tax collection agencies will look upon
you very unfavorably if you pay late, and are likely to start
immediately charging interest on any money you owe them. So write
down your tax dates on your calendar and underline them in red . . .
Twice.
