I want to let you in on a little secret that not too many people are aware of: Owning a home-based business or any type of business can virtually cut the amount of taxes you owe each year.
The amazing part about this is your business does not have to make a profit in order for you to declare deductions. According to an article written by Jeff Schnepper, "All you have to do is establish a "profit motive." Under the Internal Revenue Code, a "profit motive" is presumed if you earn any net income in any three out of five business years. It's recognized and expected that new businesses probably won't make a profit in the early years. In fact, in the early years, you can insist that the IRS defer any challenge for the first five years as to the legitimacy of your business by filing Form 5213.
Remember you don't have to show a profit -- just a "profit motive." In one case, despite 20 years of losses, the court found a profit objective and allowed the deduction of business losses in full for one company. The case was not unusual. The test for deductibility is whether you have an actual and honest profit objective. You need not have a reasonable expectation of a profit. While the Tax Court requires a primary or dominant profit motive, the U.S. Claims Court has held that having a reasonable chance to make a profit, apart from tax considerations, will suffice." To read the entire article "The ultimate tax shelter: owning your own business" click here.
The following are some tips to starting your own home-based business:
Determine What Type Of Business You Would Like to Own. There are literally thousands of home based businesses that can be started for FREE.Imagine that! What do you like to do in your spare time? Do you have hobby? Can you turn your hobby into a money-making vehicle? If you don't have an idea of what type of business you would like to start, I have listed a few businesses below:
Entrepreneur Magazine - www.entrepreneurmag.com
Coastal Vacations – www.closethesale.netfirms.com
AmeriPlan USA – http://www.deliveringonthepromise.com/tjj33
List of Home Businesses - www.homebusiness.com
The next step is to Develop a Business Name.
The name you choose for your business will depend on what type of business you would like to open. Pick a name that describes your business and tells something about who you are. Your local government office can help you get your name registered in the state you reside. Note: this step is not necessary if you decide to start a small home business.
If you need additional help go here - www.sba.gov and www.familyhaven.com Now, once you have completed the first two steps you are ready to start promoting your business. This process can be a bit tedious, but in the end it is well worth it.
Here are a list of sites that can help you promote your business via Search Engines, Directories, FFA Sites, Email Marketing and Classified Ads:
www.google.com, www.addme.com, www.sendtronix.com/aff/999, www.adlandpro.com
THIS STEP IS THE MOST IMPORTANT!!!!
KEEP RECORDS OF ALL FINANCIAL TRANSACTIONS RELATED TO YOUR HOME BASED BUSINESS.
There are literally thousands of deductions you can take as a home based business. These deductions alone can add up to a substantial refund at the end of each tax year. Accurate record keeping is essential. Every transaction you make in relation to your business could result in a large tax refund at the end of the year. Keep record of everything…advertising expenses, monthly membership expenses, travel expenses, electricity, heat, rent/mortgage expense, water, telephone, equipment purchased, repair and maintenance, etc.
There are a number of applications available that can help you keep record (Quicken, Microsoft Money). Make sure you have this information available for your accountant or tax preparer each year. This will simplify the process.
About the Author
Theresa James-Johnson is the publisher of MLMMentors Ezine and owner of the Free Money Web website. You can contact her at:mailto:tjohnson.pdc@mindspring.com. Subscribe to MLMMentors Ezine and get one free ad by sending any email to: tjohnson.pdc@mindspring.com or visit www.freemoneyweb.netfirms.com for tons of free resources, moneymaking programs, and information. |
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