Home Business Taxes - Give Yourself a Raise by:Ron Sedlak
Your take home pay could go up next week
Your take home pay could go up next week.What? You mean a raise?
Yeah ... sort of ... give yourself a raise.
Get serious! Okay, okay ...
This info came from Tax Expert Ron Mueller at a
conference I attended in Tampa in June 2008.
I was quite interested in the concept of immed-
iately increasing your TAKE HOME PAY from your
job starting next week.
You can use the extra money to build your home
business. This is exactly how it works.
You are allowed to change your W4 form with your
employer. This is a form that tells your employer
how much tax to withhold from your paycheck.
Legally, any time you have a 'change in financial
circumstances that could affect your taxes' you
can ask your employer for a W4 form, fill it out
and give it back to him.
Starting or expanding your business at home is such
a change. You adjust this form so that only the
absolute minimum legal deductions are withheld at
source.
Your boss is OBLIGATED to change your withholding
rate starting the very next paycheck. He does not
verify with the tax department first.
Check with a knowledgable tax pro IN YOUR AREA on
this before doing it, so you do it exactly right and
legally for your area.
If you think the above does not apply to you, you
have a 75 of employees
have $2,000 too much in taxes withheld during the
year and thus get a refund.
Getting a $2,000 tax return is bad! It means you
were overtaxed all year and essentially gave $2,000
as an interest free loan to the tax department for
the year!
And you do this every year? What kind of investment
is that? To heck with that! YOU could be using that
money to create MORE income for you and your family.
You could be building your home business with that
money.
HOW MUCH COULD YOU GET DONE IN YOUR BUSINESS
WITH $2,000?
And how about aiming for a ZERO tax return? That
means you are not overpaying taxes. Or maybe you
will need to pay a few hundred to the tax department
at tax time (you can have it in reserves for
the purpose).
Okay, so that is just a start.
You can save $3,000 to $5,000 per year in taxes
(additional to above) by creating and running an
Intenet business you have as home-based
businesses.
You can take ALL OF the TONS of tax deductions
legally due to you as a home-based business owner.
You do not need to prove anything to start taking
these deductions.
They are LAW passed by CONGRESS (USA).
Why? Because in a stroke of genius, Congress decided
that it would be good for people to have a home-based
busines so that if they got laid off or lost their job for
any reason, they would immediately have something
they could RAMP UP QUICKLY to a full time income!
This all applies to Canada as well and likely many
other areas. Check with a tax expert in your area
for exactly how this applies in your area.
You DO have to keep detailed records of what you
are doing so you can PROVE what you are doing is
valid should you ever receive a tax audit.
What is legally required in order to be able to take
home business deductions?
1. INTENT TO MAKE PROFIT, meaning you do some
advertising of your business and do other actions
that shows you are clearly trying to make money
with it.
Keep an accurate record of all this in a day planner
or log so you can prove what you are actually doing
in case of an audit.
2. Regularly work your business at least 45 minutes
per day 4-5 days per week. 4 hours a week is enough
to satisfy legal requirements.
Keep evidence of hours worked 'day planner' type
notes.
3. Run your business like a business. Have a
seperate bank account for it, do not mix business
and personal funds, have a seperate credit card,
records, books, etc.
4. Have an office of some sort in your home that
is VISUALLY IDENTIFIABLE AS ONE. This means anyone
can look and say, YES, that is an office working
space. It does not have to be fancy, BUT IT NEEDS
TO BE THERE.
If you have this, you are allowed to deduct a
percentage of many common HOME EXPENSES such as
mortgage, rent, home insurance, electricity, gas,
oil, etc. etc, AS BUSINESS EXPENSES.
There are books on this subject in your local library
or book store. Do some study and make the full list
and TAKE THE DEDUCTIONS!
How much of your home expenses can you deduct?
For home related deductions it depends on the size
of your office in relation to your home.
If your home is 2000 square feet and your office space
is 200 square feet, that is 10 of all these expenses as TAX DEDUCTIONS.
It's legal!
As far as car expenses go, you need to keep an
accurate MILEAGE log in your car which shows EVERY
TIME YOU USE YOUR CAR and whether it was business
or personal AS THE PRIMARY PURPOSE OF THE TRIP.
So every time you use your car (as much as possible)
you can make business your primary purpose. It does
not matter what the secondary purpose was.
You need to plan all your trips in advance. So if you
need to go grocery shopping for example, you schedule
your office supplies purchase run for the same time
and that is the primary purpose of that trip.
If you need to go to the post office to mail a letter
to your mom you need to be checking your business
P.O. box. Think of these things in advance.
Benefit: every trip by car that you can log as BUSINESS
as the PRIMARY PURPOSE increases the percentage you
can deduct FOR ALL YOUR CAR EXPENSES FOR THE
WHOLE YEAR!
So if you can prove with your log that 60 of
ALL CAR EXPENSES ...repairs, insurance, maintenence,
car washes, GAS, oil, etc.
That is a lot of extra money in your pocket right there!
I hope this is useful to you.
About the author
Ron Sedlak specializes in success through self-education and home business. He is Director of 'Shifting Paradigms', http://www.paradigmchanging.com, and Wealth Building Enterprises http://www.wealthbuildingenterprise.com. We encourage you to visit these sites for more information.
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