Best Online Income Opportunity Blog

2008-03-19T09:14:00.000-07:00

It’s No April Fool…..It Is “Tax Time”………

Your Home Business And Your Taxes……
Many people who start home businesses have received very substantial, immediate 'cash refunds'...and others have created brand new $200 - $300 -$300/month cash flows - year after year - because of previously unknown 'tax deductions'. This is often enough to totally 'finance' their business growth. In today's economy, with interest rates on savings at a puny "3%"...we would need to have a capital sum of $120,000. in the bank at 3%, to 'generate' that same $300 per month (and that's 'before' tax)!

Will these refunds occur for everyone with a home business?
NO, because of the many different individual circumstances we encounter. But because of the possibility of its large potential, this is simply a strong recommendation to carefully "check it out" with a CPA - it could very well apply for you. The "taxes" we pay over a lifetime are the single biggest expenditure we make, period. Although tax revenues fund vast services and worthy causes...it's entirely appropriate to take whatever legal means we have at our disposal to 'control' the outflow.

Tax law is very fluid. It is changing all the time, so parts of it can become outdated quickly. And there are certain strict rules, which 'must' be followed. Here's a 'general' overview only...
Uncle Sam (IRS) and Revenue Canada (CCRA) 'want' us to prosper...because they eventually get their 'pound of flesh' from that "income" (those "profits"). They have both made their tax policies in a way that makes it possible for the Home Business entrepreneur to have 'tax write offs', including writing off our vacations. However, we must be in a position to 'prove' to both the IRS and CCRA that we are making a concerted effort to make a PROFIT (a reasonable expectation) with our home business. That is the only test we are required to meet.

In the US, Congress passed tax legislation that 'requires' the IRS to help us if we own a home business and manage it with a genuine purpose of making a profit. That is true even if we are not successful at making a 'profit'...but just the creation of some 'cash flow'. Keep in mind; profitable businesses pay a lot more in taxes. So, it is wise for Congress to design the tax code to help those who honestly pursue their own business.

Do we know what kind of tax deductions we may be allowed?
We'll start with the HOME (apartment / condo) itself. This is a list of just some of the things that we may be able to deduct.

- Rent
- Electricity, gas, or oil
- Interest on your mortgage
- Home maintenance
- Medical expenses for spouses working together ***
- Purchase of office furniture and equipment
- Coffee and sugar (if we hold business briefings at home)
- Insurance
- Realty taxes
- Cleaning supplies
- Condo fees
- Security system
- Garbage collection
- Depreciation

If we employ our spouses in our business, we can supply them with a 100% Medical Reimbursement Plan as an 'employee benefit'. This makes 100% of all medical, dental and optical expenses deductible + more.

It should be pointed out that we are unable to claim 100% of our expenses for the 'entire' list. It is necessary to have a 'formula' to determine what percentage of the total we will use for our home office. That can usually be done in two ways.
Calculate the 'percentage of the total home' used for our home office using the area of each. There are established guidelines for these measurements.
The second way, if all rooms in the home are of about the same size, is to use the number of rooms used for our home office as a percentage of the total'. Both the IRS and CCRA have a requirement that the rooms being expensed must be used 'exclusively' for our HBB. We cannot set up a desk in our living room, as an example, and write off the room. We can have a pullout sofa in our office that is used occasionally for overnight guests. There are a few exceptions to the exclusive use rule. It is suggested we talk with our accountant to see if our HBB qualifies.

Our VEHICLE will also qualify for tax deductions, if used for business. But, as with our home, it is necessary to keep a record of the percentage of 'business' use and 'personal' use. To me, this is the hardest part of keeping records for my car, because I find it a nuisance (but it's well worth it). Since I use my car more for work that I do personal use, I found the easiest way for me was to note my starting mileage each morning and record the number of personal miles driven on that day on a card kept in the car for that purpose. You may find another system that works for you, but it has to be 'written' in order to be able to verify the expense we claim. We should be able to cross reference these notes with our appointment book, in case of audit.

So what vehicle expenses can we deduct?
In a few words, all 'operating costs' of our vehicle, and depreciation within limits.

These include:
- Interest on the car loan
- Lease payments
- Gas and oil
- Maintenance
- Insurance
- Parking and tolls
- Depreciation if you own the vehicle
Let's use some 'pretend numbers' and see the effect they might have on our tax bill.

(1)- HOME...Assume 15% of our HOME is used for our Home Business...Assume the total annual operating cost of our home, excluding depreciation is $16,000. We can write $2,400 off against our tax bill - just for our home alone.

(2)- VEHICLE...Let's now assume that we have used our vehicle 25% for business, and that total vehicle expenses, excluding depreciation, are $7,800. We get to claim another $1,950 against our taxes.
So, our 'total' tax deduction so far = $4,350, plus depreciation. If we are in a 35% tax bracket, we will have saved over $1,500 on our income taxes - just by operating a Home Business. That is enough to make an additional mortgage or rent payment...or pay for a trip...or to fund a typical MLM 'autoship' for a year.

What about the costs associated with running our HOME BUSINESS 'itself'...such as business cards... stationery...photocopying...computer fees...internet provider... autoresponders...marketing systems...advertising & promotion...the purchasing of leads...the purchase of products...and other expenses?
Most of these are fully eligible tax deductions but again, check with a tax provider to be sure.

Okay, so now we want to write off our VACATION...
That is simple to do. We arrange to 'do business' where we want to vacation. We can attend a seminar or make appointments where we want to go. Both CCRA and IRS allow attending conferences in resorts, provided certain conditions are met.

What about making our Children’s CLOTHING tax deductible, too?
If they're between the ages of 5 and 18, we can put them 'on the payroll', and pay our children a reasonable amount to do jobs that need to be done...deliver flyers, typing, etc. They become a 'legitimate tax deduction'. Now have the children buy their 'own clothes' + lots of other things. There are specific upper limits allowed (substantial, per child - over $4,500.), and age limitations - specified in the Tax Code.
We need to discuss these points carefully with our tax advisor, as tax rules are always changing. We also need good "records" for all activities...and keep receipts for "everything".

This is not intended to be a full discussion about the tax benefits of operating a Home Business by any means - it is merely an outline of 'some' of the benefits it may bring us....an alert to something that could have a critical impact on our finances. Again, it is strongly recommended that we discuss 'individual' tax strategies with our accountant, tax or financial advisor.

The two Government websites which will give us additional info are:
USA - www.IRS.USTREAS.gov (for 'tax withhold' form, look for Form W-4 -and take to Employer) -- OR- ( Click Here for your W4 Form )
Canada** - www.CCRA-ADRC.ca ** (Also retrieve Form T2124 - includes a 'Home Business' section / Canada)
Another website that's very useful is tax/legal expert Sandy Botkin's at...www.TaxReductionInstitute.com

A Little Bit Of Tax Humor…..
A Letter To God
A little boy wanted $100.00 badly and prayed for two weeks but nothing happened. Then he decided to write God a letter requesting the $100.00. When the postal authorities received the letter addressed to God USA, they decided to send it to President Busch. The president was so impressed, touched, and amused that he instructed his secretary to send the boy a $5.00 bill. President Busch thought this would appear to be a lot of money to a little boy. The little boy was delighted with the $5.00 and sat down to write a thank you note to God, which read: “Dear God, Thank you very much for sending the money, however, I noticed that for some reason you had to send it through Washington D.C. and, as usual, those crooks deducted 95%

The Little Known Secrets To Writing Successful Home Business Goals

2007-12-21T15:26:00.000-08:00

No matter what aspect of your life you are talking about, goal setting is a crucial factor. Of course it's especially important if you want to be a successful home business owner. Each step you make as an entrepreneur will affect the direction your business is going and goals help lead you in the right direction.

You should also set goals because they can help you to make the right decisions as you go through the trials and obstacles all home business owners face. By investing the time and energy in to creating goals right from the beginning, you will have a road map for success. This road map will guide you through each decision you make that gets you one step closer to where you want to be. In other words, if you set some overall goals today, you can help insure that your business will be prosperous tomorrow.

While we all have the same universal desire to find success and make money, everyone's idea of success and actual dollar amount will be a bit different. Some people want to make millions a year while others would be more than happy with a few thousand coming in each and every month. Whatever the case, it all starts by making a decision, writing it down, and obtaining belief that you can achieve it.

How To Set Home Business Goals Successfully:

Many people are intimidated about the future which makes goal setting a hard task. While there are plenty of opportunities for mistakes to be made, the goal writing process really isn't all that hard. The real challenge comes in actually following through with what we set out to do.

A good exercise for determining good goals is to brainstorm as many thoughts about what you want to be like in the future. Simply sit down with a blank sheet of paper (yes, you can use your computer too!) and avoid all distractions for ten minutes.

Write down anything and everything that comes to your mind. Remember, your just brainstorming now so it's all about getting as many thoughts as you can written down on paper.

Here are a few questions to get your going:

Where do you want to be in a year?
Who do you want to have with you?
Where do you see your home business in five years? 10?
How much money would make you happy this year?

After you've brainstormed for at least 10 minutes you should have quite a bit of info written down. With this information you will now be able to create some solid and secure goals that you will feel good about.

Home Business Goal Writing Made Easy Through Some Basic Steps:

1. Write down your longest term goal. This is where you want to be in a number of years.

2. Give yourself a time frame for making that happen. You may want to say that you want to make your first million in two years. Or, it may take many more for that to happen. Giving your goal a time frame helps to get your mind set in how to make that happen. If you leave it open ended, the long term goals are not benefited by your actions each day, as they would be here.

3. Give yourself smaller goals to reach as steps up to the larger one. For example, as a new online entrepreneur you may have a short term goal of getting a basic online marketing campaign set up and running within a month’s time. In six months, you might have a goal of learning 10 new ways to drive traffic to your website and implementing each one of them. As you can see these short term goals are stepping stones to a long term goal.

4. Write down your goals on paper in the following manner. “Within six months, I will have paid off all debt that I owe and be running in the clear. I will also have learned 10 new online marketing techniques that will be driving traffic to my business and making me sales.” By writing your goal down in this manner, you have listed not only what the goal is and the time frame to have it done, but also how you will get there.

5. Take this piece of paper and place it everywhere and anywhere that you will see it at least several times per day. Seeing it will allow you to think it. Thinking about it makes it happen. Success through goals is the only way to find it.

Final thoughts… Goal writing really isn't as hard as it seems. All it requires is a little time to sit down, withdraw yourself from the fast paced world, and think about what you really want. After you have a clear vision the rest of it should be pretty easy. Put your goals on paper, read them every day, and develop a "can't lose" mentality that will keep you going through the hard times. Remember, by simply writing your goals on paper you will put yourself ahead of 50% of the home business owners out their that "don't have the time" to plan out the future. Do the little things and reap the big rewards!

Check Out My "Home Business Goals" Squidoo Lens

2007-12-21T14:20:00.000-08:00

Just an FYI about a new resource called Squidoo.com. On this awesome new website you can find out information about pretty much anything your looking for. I recently published a Squidoo "lens" with plenty resources on home business goals

You can check it out at: http://www.squidoo.com/homebusinessgoals

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2007-12-21T14:12:00.000-08:00

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