If you run a home-based business, you’ll know that taxes can be expensive and burdensome. That is why there are many people who have started businesses from their homes. You might be wondering whether running a home-based business is tax-friendly or not? The good news is that running a home- business does not mean that you will be paying more taxes. In fact, according To Taxassistpreparedness.com/running-an-home-business-taxfriendly , running an home business can actually help you save more time, money and stress when it comes to filing your taxes. Here are some tips on how to run your home based business tax-free:
Legitimate Business Purpose
When you file your taxes, it is important to have a legitimate business purpose. You can claim expenses that are directly related to running your home-based business, such as Internet access, office supplies, equipment and household items. However, you cannot use your home as a convenience store or for other unlawful purposes. To keep your home-based business tax-friendly, you will have to show that your home is the main location for your business. You can take photos of your workspace and store receipts related to your home-based business. You can also keep records of clients and their transactions to show that your business is conducted from your home. If you have a separate office space, it is recommended that you maintain a separate accounting for your home-based business.
Hiring Employees
If you hire employees for your home-based business, it is important to note that you need to include their income as part of your business revenue. However, if you only hire one employee, you can claim that as a home-based business expense. If you hire employees regularly, you can also claim home-office expenses and other expenses related to their employment. Home-based businesses are generally considered to be sole proprietorships. This means that you are the only business owner and responsible for all the taxes and accounting related to your business. If you choose to hire employees for your home business, be sure to keep accurate records. You will also have to report their income and pay taxes on their behalf.
Record Keeping and Confidential Information
It’s important to keep track of all your business activities. This will allow you to prove that you have a legitimate business purpose for running your home-based business. You can use a calendar or electronic to-do list to keep track of all your activities. You can also use software like QuickBooks to help organize your home-based business finances. Try to keep all your account information, client information and confidential information like clients’ credit card information and payment preferences separate from your business account.
Don’t Spend Money On Things That Aren’t for Business
While it’s important to keep track of your business expenses, you should avoid spending money on things that are not related to your business. You can’t claim expenses such as your child’s birthday party, your Thanksgiving dinner or other household expenses as business expenses. When you run a home-based business, you have to be careful about how you spend your money. You have to make sure that you are only taking on clients who have a legitimate need to use your services. You have to also keep track of your business expenses so that you don’t over-extend yourself financially.
Bottom Line
It’s important to note that running a home-based business is different from running a business that is done out of your home. If you just want to run a home-based business, you don’t need to deal with the hassle and extra expenses of filing taxes. However, if you want to expand your home-based business to incorporate employees, property and employees, you will need to file taxes. Running a home-business doesn’t mean that you will be paying more taxes. In fact, running a home-business can actually help you save more time, money and stress when it comes to filing your taxes. If you are running a home-business, you can keep your taxes simple and tax-friendly.
