When you run a home-based business, it’s not uncommon for outsiders and the uninitiated to assume that you’ve got it good. And frankly, they’re not entirely wrong. There’s a lot to love about working from home, including the ability to set your own schedule and work in your PJs if you please. But it’s not all wine and roses. Home-based business owners often struggle with learning to attend to every aspect of a business operation. If you worked at a corporate outfit in the past, you’re no doubt used to having departments dedicated to production, marketing, sales, and accounting, just for example. But as a self-employed worker, you’ll have to wear all of these hats. And this can be a daunting task, especially if you’re familiar only with your specialty when you start. As a result, filing your business taxes can be a real chore. Here are some tips to help you get off on the right foot.
Top 5 Tax Tips For Home-Based Business Owners
Go digital. You might not see the need to stray from the traditional paper ledger when your business employs only you. But you’ll save yourself a lot of time and effort by making the switch to digital accounting practices. A program like QuickBooks not only allows you to enter data just once (since your tax prep specialist will want printed spreadsheets rather than a handwritten ledger, no doubt). But it also allows you to sync with bank accounts, track expenses, create invoices, pay bills and subcontractors, compile reports, and more. Plus, you can easily forward needed data to your tax advisor. And this is only one of many such programs designed to help small business owners with accounting.
Organize paperwork. Even if you go digital, you’ll still have to deal with hard copies in the form of receipts, at the very least. These must be saved in the event that you are audited and you have to produce proof of purchases. So rather than tossing them in a shoebox, create a filing system to sort paperwork alphabetically, chronologically, or both. Or consider trying mobile apps like OneReceipt or Shoeboxed that let you take snapshots of your receipts so you can organize and print them later on as needed.
Know your deductions. There are so many deductions home-based businesses can claim, including a home office (and a portion of utilities), office supplies and equipment, dedicated phone lines, work vehicles, business meals and travel, and even health insurance, amongst other things. You need to track all of your work-related expenses to ensure you get every deduction you’re due.
Consider quarterly filing. Not every business needs to file quarterly, and if your income is sporadic, minimal, or both, chances are good that filing quarterly estimated taxes is a waste of time. But for the home-based business that is doing consistently well and seeing gains every quarter (you should be so lucky), it may behoove you to file quarterly as a way to stave off a lump-sum bill from the IRS at the end of the fiscal year. This tactic could even net you a return for your business if you overestimate what you owe.
Hire help. Whether you only have the dough to go to H&R Block or you can afford a more professional outfit like Bowman & Company CPA, PC, you’ll find that hiring a tax professional to help you out results in bigger returns, or at least less money owed to the IRS. And in the event of an audit, you should have some measure of recourse if your accountant makes a mistake that ends up costing your business.