If you have recently started an Internet or home business, you're probably a little intimidated by having to submit a tax return and the possibilities of being audited.
Simply follow these guidelines and rest assured that filing your next tax return will go smoothly.
Get yourself an accounting ledger booklet
The first thing that you need to do at the beginning of every year is purchase yourself a accounting ledger booklet. These can be found at your local office supply store and can be found for under $10. You can deduct your mileage and the accounting ledger also.
Keep a mileage tracking sheet in your car
Each year I make myself a simple spreadsheet that I keep in the glove compartment of my car. Each time that I need to get office supplies, or I go to the post office to mail flyers, I write my beginning and ending mileage down on the spreadsheet. At the end of the year, I just transfer the mileage over to my accounting ledger.
Keep track of your Utilities
If you have a room in your home that is used only for your internet business and nothing else, you will be able to deduct a portion of your utilities. I especially like this because I have to have these things anyway with or without the internet business and now they are tax deductible. Everything from gas, electricity, long distance and garbage pick-up are allowable deductions. Be sure that you keep your payment receipts in your accounting ledger.
Other Business Expenses
You will also be able to deduct any payments to your internet service provider. If you have a website you will be able to deduct your domain name and hosting plan expenses. Other deductible items could be anything you have purchased to maintain your business such as: fax machines, copy machines, scanners, ink cartridges, desks, chairs, phones, pencils, paper, etc.
Advertising / Membership Fees
If you pay for advertising or your internet business has a membership fee, these expenses can be deducted also.
Many home business owners pay members of their family to help with the home business. Be sure to keep track of the wages that were paid to employees or family members.
I don't have too much to deduct in this category, but several times a year I will meet a potential client over dinner. Keep track of your dinner expenses; including tips...this is all deductible also.
In addition to all your deductible expenses, you will also need to keep track of any money that you make with your business.
In closing, simply keep track of all your mileage, utilities, office supplies, labor and income in your accounting ledger. Be sure to attach a copy of your receipts. Total up each category at the end of the year and take the entire booklet into your tax preparer.
You will find that having a home business can be hassle free at tax time if you have taken the time to keep track of your expenditures and income.