H-F-L-Team: Home Business Owners Keep Your Taxes Straight By Douglas Miller At Isnare.com Ezine Articles

Your Hundred-Fold-life is progressing well then you realize, that one of the biggest fears shared by most home business owners is the dreaded letter from the Internal Revenue Service saying they doubt the information contained in your personal or business income tax return. This can be made even more difficult if you combine trips to the store to pick up things for your home office and your home at the same time. It will become nearly impossible to keep every receipt you have separated for home and business and can lead to unintended inclusion of household products on your list of business expenses.

One of the most effective ways to separate them is to have a business account separate from your personal account and treat it as off limits to personal expenses. Whenever you run to the store and buy something for the business, pay for it from the business account even if it means having the clerk ring up separate transactions. This way, if a receipt is lost you can show the bank account transactions to IRS auditor and hope they understand about lost receipts.

You will also need to become fully educated on what business related expenses can be charged as a cost of doing business and which ones do not qualify for a deduction. Too many times have people believed that something they took home and used in their home office could qualify as a business expense, only to learn too late that it is not considered a business expense for the type of business they operate. Sales tax is one of the most misunderstood items on the IRS list.

With most businesses, the only items that can be purchased free of sales tax are those that are intended for resale or those that become part of another product during the manufacturing process before being resold. Paper towels, toilet paper and hand soap, even if used in the business, cannot be purchased tax-free. When the auditor looks through the books and finds these types of receipts not only will you be responsible for the unpaid taxes, but there will probably be interest charges and penalties tacked on to the total.

Another often misunderstood taxing problem is forgetting to pay local sales tax, in addition to state and federal taxes. While some communities do not have a local sales or income tax, there are many that do and failing to file and pay any due taxes is punishable by law. You may also need a business license before operating a business in many communities, which is there way of knowing who is making money in town and who to look for when it comes time to collect taxes.

If you cannot afford a tax consultant, and plan to do your own taxes, it may behoove you to buy business tax software to prevent overlooking anything that could get you in trouble with the taxman later in the year. Staying out of hot water with the IRS is important to the success of your Hundred-fold-Life.

Keeping track of all expenses can save you money on taxes, but making sure you pay all the appropriate taxes due can keep you out of trouble.

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