Home Based Business Tax Breaks

I bought It’s How Much You Keep That Counts! Not How Much You Make by Ronald Mueller after going to a seminar sponsored by my home based business circuit. Ronald Mueller himself was there to promote his book and website. Using the knowledge that he and his partner compiled into a fourteen chapter easy reader, we maximized our tax return and ended up getting back over one thousand…yes $1000 more than we had gotten the previous year.

Mueller and Craft have taken time painstakingly outlining every legal tax break that we home based business owners never knew about. They put the knowledge right at your fingertips. Expenses like mileage, rent, cars, upkeep, your home office, travel, entertainment and many more can be deducted without fear of audits. If you were to ever get an audit notice from the IRS and have used these techniques, you have nothing to worry about. Chapter 11 tells you how to make yourself audit-proof and how to deal if you do get audited. There is even a full chapter on the easiest and most functional way of keeping records.

Here is a short outline of what is included chapter by chapter in this awesome tool:

Chapter 1 Explanation of the two tax systems in the USA
There are two tax systems at work within our fine US of A. One for employees and one for business owners. There are a plethora of legal, deductible expenses for which a business owner working toward a profit can qualify. Each system has three steps one needs to follow in order to qualify their tax deductions. The list of deductions available to a business owner as opposed to the mere employee is seemingly endless! Items such as desks, pencils, tables, office chairs, even coffee can become tax deductions. Every day expenses turn into tax breaks. It’s mind boggling. Essentially, you would have the government paying you to run your business!

Chapter 2 How to legally qualify for tax breaks
Robert Allen states that the word job stands for Just Over Broke. It is a powerful revelation. The American population tends to be either just over broke, or just under broke and struggling to make ends meet. How can you change it? First you must dispel all the myths about what needs to be done in order for you to legally qualify your write-offs. Any business that can prove intent to make a profit has a huge advantage in the tax realm. A simple business plan can save you thousands of dollars. One such example is available at their website.

Chapter 3 Day to Day expenses that could become business deductions
In order for you to understand how your day to day expenses can become deductions, you must first change your way of thinking about your expenses. First you must ask yourself how they relate to the business you are conducting. Home based business are run from …you guessed it.: your home. How much rent or mortgage do you pay? Do you use your personal computer for business purposes? Are there any newspapers you need to buy to keep up with your business? What phone lines do you use in order to conduct business? Well, think about it. All these things qualify you for legal tax deductions. Your street address is your place of business. You just need to define what percentage of your bills can be attributed to running your business.

Chapter 4 How to determine your business deductions within your home
Three terms that are used to describe these types of deductions are: Indirect expenses, direct expenses, and business assets. Indirect expenses include things like your rent and general maintenance of the place in which you reside. Figure out eh square footage that you are using in your home for business, then calculate what percentage of your payments fall under deductible expenses. Direct expenses include things like office supplies and telephone services. Base phone charges are not deductible, but long distance charges and extra features that are used for the business definitely are. Additonal lines are deductible if solely used for business. Assets inlcude equipment life fax machines and furniture. These are 100% deductible if they are exlusively for business use.

Chapter 5 How to write off equipment purchased for your business
You can use furniture that you have converted into business property as a deduction. This is done by determining the value of the item then comparing it to the depriciable value and multiplying that by the percentage of business use. Any assets that you buy specifically for business use are 100% deductible and may be able to gain acclerated depreciation. All of this is explained with practical examples within the pages of the book. It may look like it’s hard to understand, but with the practical examples that are given, it’s a breeze.

Chapter 6 How to get your family involved
This one really got me. If your child is old enough to do chores, you can legally hire your child and pay them for their work. Every dime you pay them is tax deductible and tax free for the child up to $5,000. All they need is an Employer Identification Number. The website also shows you how to go about this simple and free procedure. The only thing that you need to prove is that the job the child is doing is “ordinary and necessary” for your business. From that point, you just need to write down the time that they take to do the job and the rate of pay. It’s that simple. The same goes for your spouse and whatever other family members in your household that you would like to employ.

Chapter 7 Car deductions
Your car can be your largest deduction. You can deduct the miles you use it to go from your home based business to your other business, meaning your job, and back again. Easiest way to calculate your usage is to keep track of the mileage on the car for three months and find the percentage for the entire year. Any other trips taken in the car have to be documented as having a specific purpose for the business. Some non business miles can also be deducted like relocation miles and charitable work miles.

Chapter 8 What qualifies as a business trip
If you travel for business, or even have set up appointments for business calls wherever you are headed, your vacations can become tax deductible. Meals, hotels, rental cars, and more may fall under this category. More than half of your day must qualify as being used for business alone in order to qualify for this important deduction. In that way, you can get the entire trip deducted plus all expenses while away.

Chapter 9 Entertainment expenses that can be deducted
You need to follow a few guidelines in order for this deduction to fully apply. Among the questions you need to ask yourself are: When you decided to partake of this entertainment, was there the expectation of future business? Does the person I am spending my money on know that this is all about business? Were you planning a set of events that would eventually have you dealing with business matters? Under this guideline, golf can even become a deduction.

Chapter 10 Documentation and simple record keeping
There are many easy solutions to record keeping without having to be overly organized or tedious. Placing a piece of paper near your dashboard to record your mileage, saving your receipts in an envelope, and trying out the Sixty Second Tax Savings Organizer on their website will help you begin to get it all together. The system the authors recommend is to set up a nine folder filing system where you would label each folder and place your expense reports in those. These categories include advertising and promotion, wages and commissions, and purchase of business assets just to name a few. The only other proof you may need is an invoice of an item actually being paid off if you were to order it from somwhere online or through a catalog.

Chapter 11 Audit proof your tax returns
After following all the steps outlined in the aforementioned chapters, you should have no problem with being audited. Just make sure that your math calculations are correct. There are five very important steps that one can take to ensure themselves against audit, such as making sure you have documentation for everything you have claimed as a deduction, making sure your checkbook registry is concise, and having you business plan at hand. The authors say you should never attend your own audit if you DO get audited because it is less likely that the audit will scritinize your every move.

Chapter 12 How to get more take home pay
You need to learn the difference between allowances and exemptions in order to get more money back in your pocket. Allowances, for example, is the amount you will allow the government to withhold from your take home wages. You have to be concious of what you write on that little line. Getting taxes back is not a GOOD thing, as it has been purported to be in the past. It actually means that you have given your money as an interest free loan to the government for a year!

Chapter 13 How to put it all together
This chapter just reiterates and summarizes what you have just learned. There is also a worksheet there that you can do in order to calculate just how much you will be saving in taxes after employing the techniques outlined in the book.

Chapter 14 How to get more from your past tax returns
This chapter shows you how to backlog through your taxes from three years ago and deduct the things that you didn’t know you could. You just have to go find the documentation and file an amendment. The best part is if the government ends up owing you money you get that money plus the interest for the time they had your money!

Then a few final thoughts from the author imploring you to use these techniques and save yourself a lot of money.

WIth this dynamite tool, you could save hundreds even thousands of dollars you never knew you had! Take advantage of over twenty years of research. All you have to do is buy the book! You have no excuse because it’s tax deductible, too.

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