Posts Tagged ‘Common’

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Four Common Tax Myths All Home Business Owners Should be Aware of

The home office deduction gets a bad wrap. There are so many rumors out about the home office deduction that you may want to avoid the whole subject. But if you have a home office and aren't deducting it, you could be missing out on some very valuable tax savings. Let's take a look at the truth behind the myths about the home office deduction.

Myth Number 1 - The home office deduction is a red flag for an audit.

Twenty years ago, this might have been true, simply because it was unusual. Now, the home business seems to be almost as popular as home ownership! Millions of individuals operate some kind of business activity out of their homes. Others telecommute, and deduct their home office expense as an itemized deduction. The home office deduction is no longer an automatic flag for an audit.

The key to avoiding an audit is reasonableness. The IRS uses computer analysis on all tax returns. Any deduction that is excessive on your income and the benchmarks for your industry may be questioned.

Bottom line: Deducting a portion of your home expenses as a cost to operate your home-based business is expected!

Myth Number 2 - If I take a home office deduction, I can deduct all the costs of my home.

You deduct a portion of your home expenses as a home office expense based on the square footage of your home office space. If you have a 2000 square foot home, and a 200 square foot office, you could deduct 10% of your home expenses.

Unless you operate a day care center, your home office space must be exclusively used for business. Your kitchen will not qualify as home office space simply because you use the table to complete paperwork. If you use the space for personal and business, it does not qualify.

The easiest way to keep track of this is to designate a room or rooms for home office purposes. If you don't have a complete room to use as office space, use furniture to separate the personal part from the business space.

Of course, there is an exception to this rule. If your business is wholesale or retail and you do not have any other fixed location, you can include any space you use for storage of inventory or product samples as part of your home office. This space does not need to be used exclusively, but must be used regularly, and be suitable for storage.

Bottom line: Calculate the square footage you use exclusively for business and the square footage of your storage space for inventory to determine your home office deduction.

Myth Number 3 - I can only take the home office deduction if I work at home exclusively.

Old rule! Congress expanded the home office deduction to allow business owners without any other fixed business location to take a home office deduction regardless of the number of hours they spend at home. If you provide services to customers or clients at their location, you can still qualify for the home office deduction. You simply must use your home office for administrative and management duties.

Bottom line: You can deduct your home office as long as you don't pay for other office space to run your business.

Myth Number 4 - The home office deduction will make me lose my tax exclusion on the sale of my home.

The rules have changed here, too. If you use 10% of your home for business purposes, you no longer have to recognize 10% of the gain on the sale that could have been excluded if you meet the requirements for the sale of your principal residence.

What you do need to do, however, is include any depreciation deduction you took in prior years as a taxable capital gain. You still benefit, because your capital gain rate is most likely lower than your ordinary income tax rate. You are able to take the original depreciation deduction at ordinary income tax rates, and bring it back into income when you sell your home at the lower capital gain rate. Your depreciation deduction can also reduce your self-employment taxes.

Bottom line: You can still save taxes overall by taking the home office depreciation deduction each year.

Operating your business from home is a very smart move financially for the new or small business owner. You can save yourself thousands of dollars in rent by operating at home rather than renting business space.

But the cost of housing your business is an expense, and should be treated that way. You would not hesitate to deduct rent expense for your business. Treat your home business expense the same way. The tax money you save can be used to grow your business, or even to fund your family vacation! Talk to your tax preparer if you have more questions, and get ready to take that home office deduction on your next tax return!

Todd Jensen, "The Profit Engineer", has helped hundreds of business owners make their business more successful and profitable. For tips and strategies on how to boost your business success as well as increase your profits, visit
http://www.theprofitengineer.com or
http://www.freebusinessstartupinfo.com

8 Common Mistakes of Internet Marketers

If you wish to be a successful Internet marketer you will want to avoid these 8 mistakes:

1. Failure to prepare properly. Many Internet marketers are simply lazy and will not make the effort to prepare properly. Refrain from being overly anxious as if you’ll miss the boat if you do not market your website immediately. Use however many days it takes to setup all the appropriate advertising accounts and advertisements properly. This will make your administration more efficient and enable you to fly through your schedule tasks effortlessly each day. The net result is that your marketing efforts will be far more productive than if you were to take a haphazard approach.

2. Failure to implement an advertising strategy. You must have a plan with well defined goals if you wish to have positive marketing results. Normal 0 false false false MicrosoftInternetExplorer4 Do not try to recreate the wheel. Find out what successful people are doing and do the same. Regarding goals, write them down. When you achieve a goal mark it as “completed” and replace it with another. By doing this very simple step you can monitor your effectiveness and progress.

3. Failure to be professional. Some of the ads on the Internet are of embarrassingly poor quality. Be professional in your business approach and in the design of your ads. If you lack the ability to produce professional ads then find a resource that can. The quality of your website and advertisements is a reflection on you. Also, when dealing with customers always be courteous and professional even when they are not. If you are professional you will shine above the rest and earn customer confidence.

4. Failure to implement and adhere to a disciplined schedule. If you don’t have a realistic schedule in place then you will not be disciplined in marketing your ads properly. Consistency not volume is the key to success in marketing on the Internet. A schedule allows you to be consistent and also forces you to be disciplined. The Internet is not a “get rich quick” environment. It takes hours of dedicated and consistent work. You must be committed to putting in the time if you wish to have good marketing results.

5. Failure to utilize the right tools. There are some very innovative tools on the Internet to make the operation of your business more efficient. Many of them are very affordable and they will save you from having great frustration. Some marketers take the approach of being a “penny wise and a pound foolish.” In saving their pennies they are losing out on making the bigger dollars. Don’t ignore the many tools which are available.

6. Failure to build a downline. Your downline is the cornerstone of your business. A downline is your customer list or they can be referrals that join certain advetising programs through you serving as an affiliate. Verious advertising sites offer you some type of compensation for bringing them referrals. Don't ignore the value of these referrals. Some Internet marketers are so anxious to advertise their product they fail to have an understanding of the bigger picture. A big downline can save you money in your advertising and enbable you to advertise more effectively. When soliciting always get the email address of your customer for future solicitations and sales.

7. Failure to track ads. Much time is wasted on unproductive sites and ads. If you’re not tracking them you will continually work in ignorance. You must have a measure of what is working and what is not. Is the program that you are participating in yielding the desired results? Are your ads well written and effective in drawing customers? You will never have the answers to these important questions unless you track your ads. You can waste a great deal of time on poor advertising programs and bad ads if you never track the results.

8. Failure to understand the advertising medium. You must understand how each type of advertising program works if you’re going to be an effective marketer. Whether you use pay-per-click advertising or membership driven sites like safelists, traffic exchanges and text ad exchanges all have their own personality. Not only do you need to understand the mechanics of each but also the general personality of their membership.

Published by InternetSurvivalGuide.net
Copyright 2009 InternetSurvivalGuide.net
All rights reserved.

Our goal is to provide you with informative articles, educational resources and tools for successful Internet marketing.

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