Home Business Tax Management
The best way to keep organized for the upcoming tax season is to have a plan for organizing your paperwork to be filed in folders all year long so when tax season arrives, you can confidently avoid missing any large deductions. The way I keep record of all the money that comes across my table is I have several folders I use stored in a filing cabinet. These folders include records of all my sales from month to month, receipts for any business expenses for the year, bank statements, and credit card statements.
If this happens to be your first year or you are planning on starting a home business you need to get your tax forms for your business entity type and look over what information you are going to have to provide. Every state has different laws and restrictions for filing taxes.
For every order I fill, I print out a basic order receipt for myself showing my customers name, address, contact information, date, what they bought from me, sales tax, and shipping charges. It is better to have individual copies of each sale you make incase the IRS decides to question certain transactions.
Your deductibles are usually at the higher risk of being raised into question by the IRS. Do not try to write off expenses you spent on anything that does not directly involve maintaining the business. Web hosting expenses, marketing expenses, office supplies, and anything like that is what you should write off. I keep all of my bank statements, picture copies of checks, and the receipts from other companies that supply my business needs. Canceled orders and bad checks are also kept on file.
Here is a list of the common deduction types for an ecommerce home business:
Business Expenses
Advertising and Commissions and Fees Depletion and Depreciation Insurance and Loan Interests Professional and Legal Services Office Expenses and Expenses on Business Property Maintenance and Repairs Taxes and Licenses
Labor Expenses
Contracted Labor and Employee Benefit Programs Wages and Paid Commissions
You can also tie your own home, automobiles and other personal assets that could be claimed on rent and car payments as being used for the business based upon your business entity type. You will need to keep your sales receipts, credit card receipts, bank statements, and invoices on file for up to three years. All of your 1099 forms and other tax forms should be kept forever. Keeping track of your deductibles and your sales are very important and your business could suffer if you do not have a good management system for tracking all expenses and sales.
Related Tags: home business, management, tax, taxes, deductions, expenses, irs
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