Work from Home? What You Need to Know Before Tax Time
Working at home certainly has its perks. There’s working in your pjs…having a flexible schedule…but all those benefits aside, you have to be über diligent about paying and filing your taxes correctly this time of year.
Here’s what you should know before tax time.
Get Your Deductions Straight
Another benefit of working from home is that you can write off many of your business expenses, including a portion of your home as your office. Here are other deductions you may qualify for:
■ Office supplies
■ Computers, printers, and hardware
■ Business trips
■ Taking clients out for a meal
■ Advertising or marketing
Knowing that you can write off these business expenses, you can confidently invest back into your company.
Charitable Donations Count Too
Donating money or items to local charities does more than give you that good feeling; you can also write off the expenses. If you itemize expenses on your tax return, you can claim any donation, but make sure you hang onto those receipts!
Start Planning Changes to Your Business Structure
Sole proprietorship is the most common business structure for home-based businesses (and all businesses, for that matter), but it might not be the best option for you. Consider incorporating or becoming an LLC for next year. Both of these business structures help you avoid double taxation and provide other tax benefits, as well as protect your personal assets.
Keep All Business Records
No one enjoys storing all those paper receipts, but you’ll need to save them if they relate to business expenses. Everything from a business dinner to your printer cartridges should be accounted for with receipts. We recommend Freshbooks or Outright (we now use Quickbooks for Small Business).
Fortunately, technology makes this a little easier. There are mobile apps that let you take a picture of a receipt and store it as a digital file, helping you keep your paper storage to a minimum.
Know What Your Filing Status Is
When you overpay your taxes, you’re giving the government a free loan until you get your tax reimbursement in April. That’s money you could be using to grow your business today.
The reverse of this is not paying enough taxes throughout the year and having a large tax bill due in the spring. That’s certainly no fun.
Having Your Tax Documents Organized Saves Time
The deadline for your clients or employer to send your 1099s, W2s, and other tax forms was the end of January, though inevitably you might have a late straggler or two. Keeping all your documents together, in a shoebox, for example, will make filing your taxes easier, and will keep you from accidentally missing inputting one of the forms.
Rushing Increases the Chance for Mistakes
Filing taxes as a business owner tends to take longer than it did when you were an employee. Don’t put off filing until April 14 at midnight, or you’ll increase the odds of making a major error that could delay the processing of your taxes.
Starting early will also help you figure out if you’ve bitten off more than you can chew. If that’s the case, there’s still time to hire a professional.
If you do find filing your home business taxes more than you can handle on your own, work with a tax professional or accountant. They may be able to find deductions you didn’t know about, and will have a better understanding of the most recent tax laws, which will make the process less of a headache.
Tax deadlines are rapidly approaching. Which of Nellie’s tips will you incorporate today? Inspire a fellow mompreneur by sharing in the comments!
Latest posts by Nellie Akalp (see all)
- Are You Ready for Tax Time? Here’s How to Be! - March 29, 2015
- Mastering Small Business - February 17, 2015
- Why You Should Incorporate (and How to Make it Happen) - February 3, 2015