No 6 – Failure to Take the Home Office Deduction

As a follow up on No. 5 where we talked about “fear of red flags”

Failure to take the home office deduction is one of the most common fears I see that home based business owners have.  But even if you have an outside office and you  do your administrative or other aspects of your business at home, you may also qualify for this deduction.  If you use a part of your home regularly and exclusively for your business – you are entitled to take a home office deduction.  And you should – Congress wouldn’t have written this  into the tax code if they didn’t want you to take the deduction.  Find out more about the home office deduction today.

No. 5 – Fear of Red Flags

Fear of red flags

This is where a business person may fail to take legitimate (keyword there: LEGITIMATE) tax deductions.  I have encountered many people at my seminars and also potential clients who are afraid they’ll be audited if they take certain deductions.  There is no single category of deduction that would generate an automatic audit.  Let me repeat that – there is NO single category of deduction that will generate an automatic audit. 

All you are doing when not taking a deduction that you are entitled to take is paying more tax.  That’s it.  I’ll be posting more on this later.  In the meantime, if you are not taking deductions because you are worried about red flags, I encourage you to educate yourself about what tax deductions are available to you and what qualifies them as legal for you to take.

A great place to start is the Deduction Diva Tax Organizing System  (and all calls on the Featured Products page)- on  sale for a few more days only – for a tax deductible $89.95 – you get a tremendous education in easy to employ, legitimate tax strategies.   Learn more here:

http://www.deductiondiva.com/FeaturedProduct.html

NO. 4 – Failure to make a proper election when writing off asset purchases

Failure to make a proper election when writing off cost of asset purchases

Known in the tax world as “electing Sec 179″  you must separately state the cost of asset purchases such as computers, furniture, equipment, etc. and show on Form 4562.  Many taxpayers improperly include these assets as office supplies.  This happens because people know they can write them off – the danger is in failing to make the election on the proper form.  On audit, the deduction can be denied if improperly expensed. 

It’s not in my nature to focus on the negative – but this is tax time and for those of you who are do-it-yourselfers when it comes to tax preparation – I want you to be aware of the mistakes I see.

Yikes – I forgot something in yesterday’s newsletter

I forgot to remind everyone about the two teleclasses coming up on March 1st and 2nd.  If you haven’t heard about the tax benefits of paying your kids, you’ll want to click on the link and see what you’ll learn on the March 1st teleclass.  At $19.95, it’s kind of a no brainer to find out how you can shave potentially $1,000’s off  your tax bill every year.

http://www.deductiondiva.com/offers.html

NO. 3 Failure to Keep a Mileage Log

Failure to keep a mileage log -

Yes, I know it’s a pain, but I also know that if you keep a log you will be able to record more legitmate business miles than if you choose to “remember” during tax preparation.  If you use the Mileage Method, for 2009 you get 55 cents per business mile as a deduction on your tax return.  So think about this, if you drive 500 miles per month for business, that would produce a $3,300 tax deduction.  Depending on your self employment tax, federal tax bracket and state income tax – you could be saving anywhere from $500 to $1700 on your tax bill.  If you don’t keep your mileage log, you risk losing that deduction entirely upon IRS audit.  Ouch.

NO. 2 Deducting Inventory Costs Before you sell your Products

Part 2 of our 25 random things you might get wrong is:  Deducting inventory costs before you sell your products

IRS is very clear on this – you have to match the costs of your products with sales.  This means it is absolutely NOT good tax planning to purchase a bunch of inventory in December, thinking you’ll get a big write-off.  But hey, there are lots and lots of legitimate write-offs out there – make yourself a promise to learn one new tax deduction each week – and  you’ll be amazed at how much money you can save!

Deduction Diva has the tools that help you learn without heavy jargon and inexpensively to boot!

NO. 1 – 25 Random Things Business Owners can \”get wrong\” when preparing their taxes

I\’m thinking that you really don\’t care what I\’m doing right now.   If you know me, you already know at least  25 random things about me.  If you don\’t – I\’m pretty sure you care even less about that than what I\’m doing right now.   I do know those of you with home-based businesses, do probably care about what you might not be doing right when it comes to taxes.  Today we begin a series of 25 Random Things you might not be getting right.

1. Erroneously avoiding self employment tax by misinterpreting your 1099-MISC.  There are several things that can go wrong here

• If you are a writer, your 1099-Misc might show royalty income.   Royalties from writing are considered self-employment income if you file your return using Schedule C.  Some people mistakenly put this on Schedule E, thereby eliminating the self-employment tax entirely. 
• If you are a direct seller and earn (key word:  EARN) non-cash prizes & awards – these sometimes show up on line 3 of Form 1099-MISC.  Some people believe these awards go on page 1 of the Form 1040, rather than on Schedule C.  Not so.  All of your  earnings from self employment should be reported on Schedule C.  Your net earnings from Schedule C, along with other self-employment income is subject to self-employment tax.

Be sure you are reporting each category of income correctly.  It will save you heart ache later.

Check back tomorrow for another random thing . . .

Wine Shop team

http://tinyurl.com/cz45lo

This is the link to the special -

Establishing a Medical Expense Reimbursement Plan Teleclass

This course is for those of you who have asked about the mechanics of these types of plans. More details to follow. Course date: March 2, 8:30PM Central time. 29.95.  Should you decide to go with Vicky  Collins, CPA as your MERP Plan administrator, the teleclass fee will be applied to your plan fees.

http://tinyurl.com/cpmluu   Order Now

How to Pay Family Members Course – call + handouts available now

The live course was held on March 1st, 2009.  It is filled with information about the whys, the hows, the dos and the don’ts of paying family members.  We emphasize paying your children in this call.  (Sorry – If you are self employed with no kids, this is not a course for you.)  Available now for only 19.95.  A direct link to purchase is shown below.  If you need more information about the call – go to the Featured Products page of DeductionDiva.com

http://tinyurl.com/crp96t