The IRS Wants You To Make Money With Your Home Based Business

Contrary to what everybody thinks, especially W2 employees, the IRS is your friend. The IRS tax code is designed and set up for promoting small business and home based business. Only five percent of the IRS code is really written about bringing in income for the IRS. The rest is all about expenses and deductions. So 95% is dedicated to reduce your taxes!

It is awesome!

There are a few things that you need to provide the IRS to qualify your home based business, but they are mainly looking for profit intent, consistency and record keeping.

1. Profit Intent is relatively easy to prove. If it’s a hobby, like if you’re trying to turn your Saturday golf game into a business, that’s going to a bit tougher. Home-based businesses like network marketing, setting up a paint company or wedding planner or something, should be pretty easy to prove it’s a “for profit” business.

2. Secondly, you need to work your business on a regular and consistent basis. There’s no specifics on that but, even four to six hours a week, every single week should be sufficient. Of course, I recommend more than that if you are going to be serious about your business.

3. Lastly, you’ll want to keep accurate records to prove that you have income and expenses.

If you keep accurate records of expenses, you can offset other income that you have. The expenses you have from RUNNING your business, such as expenses from your office in your home based business or money spent building your business, doesn’t go to waste. You get to write it off. Your marketing, your business cards, your flyers, brochures or anything like that. If you want to RUN a business, you need to use all legal write-offs in your business and that’s what will help you, not so much to get profitable right away, but make it worthwhile so that you’re not losing money.

My Two Favorite Legal Deductions

My first Favorite legal deduction is the home based business office deduction, which is huge!

For example, if you have a 1,000 square foot house and you have a 100 square foot office, this gives you a ten percent write-off. It doesn’t matter whether you’re renting or you own your home and have a home mortgage. If your rent or mortgage is one thousand dollars, you get to write off, 100 dollars every month. If you need a new computer for your business, a video camera, software or anything that you use to promote and market your business, it can be written off.

My second favorite deduction may be even bigger. It’s your automobile. Currently the business use mileage rate is 55.5 cents per mile. Always check the IRS website or with your accounting professionals, for updates.

Let’s look at how this works.

Let’s say you need to drive to go meet a prospect or you have to go to the office supplies store. You’re going to keep track of all your “business” mileage to and from your business stops. You track ten miles in each direction for twenty miles total. That’s $11 that you will deduct at year’s end. As long as the initial reason for the trip was business, you can write it off. It will be between you and me if you just happened to stop at the grocery store on the way home. Oh yeah, the food you ate at your business meeting;50% of that can be written of as well!

Other Legal Deductions

  • If you have a child over the age of 6, they can be employed in your business. You can deduct their wages and they don’t have to claim it up to $5,450. Double whammy! It must be a business related activity and not just taking out the trash. They could do filing or database management. Face it, your 6-year-old probably knows how to use the computer better than you anyway!
  • With the proper planning you can deduct part or all of your vacations. Let’s say I am going to New York to meet with a client or prospect. We are going to have a few business meetings and talk about ways to grow our business. I can take my wife and we can do some tourist stuff while we are there. Travel can be written off with the proper planning.
  • All of your health costs may be able to be deducted.
  • Again, 50% of all food and entertainment that is “business” related can be deducted.

These are just the tip of the iceberg folks. You need to learn this stuff! If you know what you can deduct, it will help offset the cost of getting your home based business up and running and put you in a NO LOSE, situation. Once you are profitable, you will still need to track your deductions, but it will have become second nature by that point.

There are many books on this subject and your tax professional can help as well. You need to have the right tax person because some will fight you on certain deductions. If they are LEGAL, there is no reason why you shouldn’t be taking them. It’s all in black and white on the IRS website, so get familiar with it.

Using Your Money For The Monthly Expenses Of Your Home Based Business

I hear people saying that they just can’t afford to start a business. GARBAGE! If you are currently employed, which you should be if you are trying to start a home based business, you can afford to get started. All you need to do is change the number of withholding on your w-4 and receive your tax refund in advance.

Dangerous? Not even close. It’s your money! Getting a huge refund, once a year, is not a good thing. You are loaning your money to the government. Why not use it to create income for your family? Don’t get this money if you are going to be stupid and just buy stuff.

Use it to start a home based business!

I hope this helps show you how to make money with a home based business of your own. It’s not that scary and you can “learn as you earn.”

How to Acquire Better Business Bureau Accreditation

The Better Business Bureau (BBB) has acted as an advocate of marketplace trust and good business practices for over 100 years, acting to provide consumers with information on the integrity of businesses around the world. Businesses looking to improve their image with the public and acquire new customers through the BBB’s Accredited Business Directories can pursue accreditation and earn the right to utilize the internationally recognized BBB logos in their advertising. Acquiring accreditation requires the meeting of certain criteria and application to a local BBB.

1: Visit the Better Business Bureau website or contact your local organization to make sure your business meets the BBB Code of Business Practices/Accreditation Standards. Businesses are required to:

• Establish and maintain market trust. Businesses seeking accreditation must operate in a service area for over a year, meet all licensing and bonding requirements in their local jurisdiction, maintain a satisfactory BBB rating, and avoid government actions demonstrating a failure to comply with BBB ethical standards.

• Maintain honesty and ethics in advertising practices. Businesses must comply with all governmental advertising laws and with the BBB Code of Advertising.

• Honestly represent products and services. Businesses should make known all important facts to customers without misrepresentation, obfuscation, or omission.

• Maintain transparency. Businesses should not seek to hide the nature, ownership, location of a business or policies, procedures, or guarantees that may influence a consumer’s decision to purchase goods or services.

• Honor promises. Businesses should abide by all written and verbal agreements and correct mistakes as quickly as possible.

• Respond promptly to disputes. Businesses must make good faith efforts to respond to disputes raised with the BBB, including acceptance when necessary of BBB mediation.

• Safeguard customer privacy. Online businesses must disclose security and privacy information on their websites and businesses which collect sensitive data must comply with industry standards of protection and disposal of such information.

• Embody integrity. Businesses must avoid any unethical activity which reflects negatively upon the Better Business Bureau and its accredited businesses.

2: Once you’ve made sure your business complies with the Code of Business Practices, look up the incorporated Better Business Bureau office for your region and make an inquiry. You can also visit your region’s BBB website and submit a contact form to receive information from a consultant.

3: Submit a full application. Bureau staff will review and verify the application and research your business. You may be asked to provide additional information or to provide proof of information on your application. Your business will then be evaluated on its compliance with the BBB Code of Business Practices.

4: If the BBB approves your application, you must then pay the Accreditation Fee to receive all the benefits of BBB Accreditation. If your business is denied, the BBB will mail you a letter telling you why you were denied and what steps you might take for reconsideration.

Good luck. You have little to fear if you maintain fair and honest business practices and comply with industry standards. The BBB aims to create marketplace trust by presenting the public with honest businesses and does not otherwise discriminate.