Home Business Legalities And Tax Advantages

Home Business Legalities And Tax Advantages

Source: Flickr

Even if you work out of your home, most cities and/or counties require you to have a business license and/or permit. Check with your local government municipalities to find out what the requirements are for where you live. Depending on where you live, you should be able to get this information from your local courthouse or townhall.
Zoning may also be an issue. Municipal ordinances can be very restrictive about what types of businesses are allowed in a residential district. This also applies if you plan on placing a sign outside of your home. Again, check with your local government municipalities to find out what the requirements are for where you live.
In addition, depending on how your home business is structured–as a sole proprietorship, partnership or corporation–there may be forms to file with the state. The legal structure affects taxes and the liability of the owner and the home business, so it’s important to follow the appropriate procedures. Contact your state’s Department of Revenue for filing fees and information.
If you plan to operate your home business under a name other than your own, you will have to register a fictitious name with the county–usually referred to as a DBA filing (Doing Business As). The exceptions to this regulation are corporations and partnerships doing business under the umbrella of the corporate or partnership name.
As a home business owner, you may be required to file estimated tax returns and pay estimated taxes quarterly. If you have employees, you also have to submit taxes withheld from employee paychecks. Here are some of the taxes you may be responsible for:
Employment taxes — Federal income taxes, Social Security and Medicare, federal unemployment and state income taxes.
Federal self-employment tax–Required by those who work for themselves to cover Social Security and Medicare contributions.
Sales tax–Each state requires a sales tax number for any company involved in selling tangible items. Sales tax is collected, reported and paid to the state either monthly or quarterly.
Unemployment insurance tax — You are required to pay federal and state unemployment taxes if you have more than one employee on the books for at least 20 weeks in a calendar year, or if they have paid more than $1,500 in gross wages in a calendar quarter.
Again, check with your state’s Department of Revenue for more information.
A home business qualifies for all of the same tax deductions regular businesses do. In the eyes of the IRS, the only difference between most home businesses and Fortune 500 Companies is their size, and the fact that home businesses can also deduct many household and living expenses.
Owning a home business will entitle you to deduct thousands of dollars in every day expenses. After all, why pay more in taxes than you have to?
Listed below are just some of the items you are allowed to deduct:
Your car and car expenses.
Your mileage.
Your home computer, printer and other office equipment.
Your home. If you’re not a homeowner, you are allowed to deduct the area where your home office is set-up.
If you’re a homeowner, you may deduct a portion of your property taxes and utilities.
Your travel expenses.
Your restaurant meals, entertainent, dinner parties.
You may pay wages, tax free, to two of your children, if they are involved with the business.
You may deduct your families health insurance.
NOTE: To qualify for the above tax deductions, you must be actively working your home business.
In closing, since tax laws are continually changing, I highly recommend you consult with your accountant or tax advisor to learn more about applying the aforementioned deductions to your home business.

You cannot copy content of this page

Social Media Auto Publish Powered By :