6 Tax Tips for Home Office Business Owners
If you’re a small business owner with a home office, taxes can be a little more challenging than when you relied on your employer to take care of your W-2s. Taking advantage of ways to trim your tax liability is an important part of ensuring that your new business venture is the success you want it to be. WIth that in mind, we’ve compiled some basic home office tax tips to help you stay ahead of the tax game.
- Know What’s Deductible.
If you’re home office is currently your dining room table, you can’t use it as a deduction. In order to qualify as your home office tax deduction, it has to be a place that is used exclusively for your business, even if it’s a small area of a room. So if there is a way to turn a corner of the exercise or laundry room into your private office, than do it. Your home office is one of the most important tax deductions to include. In the past, a complicated percentage deduction was typically used, but now, the formula is $5 per square foot, up to 300 square feet total. So get working on that converting that spare bedroom now!
- Home Utilities.
Once you’ve qualified the space in your home as being a legitimate, tax-deductible home office, it’s time to look at those home utilities that are used to power that home office. Your heating and electricity bills can definitely be proportionately used as a factor of your deduction, as well as your wi-fi services and any dedicated phone lines you have for that home office.
- Don’t Forget the Office Supplies and Travel!
All that paper, toner, tape, paper clips and other office staples from Staples can all be included in your deductions, so make sure you’re saving all your receipts over the year for anything you buy that you’re using for your business. Traveling for business or driving to appointments? Save those airline ticket and hotel room receipts, and keeping a mileage log and pen in your glove compartment so you can quickly jot down miles driven to meet up with clients is a great way to ensure you get your proper deduction for mileage. Keeping your gas and lunch meal receipts all together with your mileage log will it much easier for your accountant when tax season rolls around, too, Since 50% of your meals can qualify as a deduction. And making a quick notation of clients met with and projects discussed on receipts when the meeting happens is a great habit to get into right from the start.
- Time for An Upgrade?
Looking to add some zing to your presentations with a color printer upgrade or make sitting at your home office desk a more comforting experience with a better office chair? Go for it, and make sure to give those receipts to your accountant at tax time, too. Keep in mind that when it comes to large home office purchases (like a printer or a new laptop), the deduction can be claimed in two ways: all at once, or as a Depreciation Deduction, which means the deduction is applied gradually over the life of the item; discuss with your accountant which deduction method would be best for you.
If you’re self-employed and running your own business, it’s possible you can deduct the cost of the policy for you and your family. The best way to ensure you’re participating in a deductible health care plan is to discuss the policy with your accountant or business advisor first. If you decide that the costs of a health care plan is too expensive, know that participating in a spouse’s health care plan is NOT considered a deductible expense.
- Retirement Plan.
When you’re just starting out in your own business, you’re thoughts are focused on the present, and getting your business off the ground. However, it is always important to keep your future goals in mind, and putting savings into a tax-deferred retirement plan is one of the most solid ways to keep your taxes low. Getting your plan set up and contributing even the bare minimum will help your out when it comes tax time, and even the smallest contributions can add up quicker than you may think. Talk to your business advisor to find out what contribution you can afford, and which is the best plan for you and your tax liability.
5 Reasons Why You MUST Have an Accountant for Your Business
It can come as a shock to many people trying to start a business that as many as 80% of new businesses fail within the first year and a half. The primary reason for this daunting statistic? Bad financial management. What DOESN’T come as a shock is that most of these failed businesses tried to handle the financial aspects on their own. This is why having a knowledgeable financial advisor on hand as partner and consultant is a key component to starting any business venture, especially for small businesses just getting off the ground. Professional accountants do a lot more than just helping you file your business taxes. Through a comprehensive analysis of your financial situation, cash flow and expenses, an accountant can ensure that you have an accurate forecast for your business so that you can stay prosperous and in the black for the year. Here are five reasons it’s vital to have an experienced, knowledgeable accountant helping you with the success of your business.
Ensuring you are keeping track of any potential deductions is a vital part of filing your business taxes. Many new entrepreneurs leave money on the table by forgetting to account for mileage, out-of-pocket expenses or home office expenditures. A professional accountant will help keep track of those types of potential money-saving deductions throughout the year so that come tax time, you can rest assured that you are doing everything possible to save your business money.
- Real-Time Decisions.
Many small business owners who don’t work with a professional accountant or business advisor find that when it comes to making big financial decisions, – like buying a large piece of equipment or hiring an employee – they are often doing so in a financial vacuum, without full knowledge of what the implications of the expenditure might mean for them down the road. Having a professional advising you on your cash flow and budget can make those decisions much easier, and you’ll be able to make in real-time with full knowledge and confidence.
Yes, the word that strikes fear in the hearts of any entrepreneur: the dreaded audit. One of the biggest mistakes a business owner can make is to only seek the advice of an accountant once they are already in an adverse situation, when they could have potentially avoided the situation by having worked with an accountant throughout the year. There are many reasons why the IRS decided to audit a business, from something as simple as too many mistakes on a tax form to something as complex as too many write-offs. An experienced accountant can protect you from these types of issues, and using their expertise to focus on the finances will free you up to focus on the important things, like running your business!
- Saving Time and Energy.
A common mistake among small business owners is that their razor-thin budget means they can’t afford an accountant. However, if you weigh the amount of time and energy you spend worrying about and dealing with the financial state of your business, you’ll quickly see that the benefits of hiring someone to do that for you far outweigh the cost. A business owner needs to focus on the day-to-day marketing and management of the business itself, and engaging a professional to deal with the finances will allow you to do just that.
- Planning for the Future:
One of the most important benefits of hiring a financial advisor for your business is the ability to plan knowledgeably for the future. A professional can help you look at past performance indicators that can help you plan for the possible seasonality of your business, which in turn can assist you with inventory control, budgeting for when to buy big-ticket items, and figure out the best plan to ensure the longevity of your business.
The life of a new business owner can be exceptionally stressful, but deciding to hire a professional financial consultant to collaborate with you on your venture can take a lot of that stress off your back, and allow to actually enjoy your new entrepreneurial status, and look forward to a future with confidence. <strong>Executive Public Accountants</strong> specializes in partnering with small business owners to ensure the financial health of their business is secure. <strong>Call us today</strong> to see how we can help you and your business breathe a financial sigh of relief!