Economics Finance

The old saying goes that death and taxes are the only two certainties in life. Maybe so and maybe not. I’m discovering a third certainty in life: most Americans are paying way too much in taxes to Uncle Sam. There are hundreds of tax deductible business expenses for small and home-based businesses that Americans currently overlook.

Did you know that if you have a home-based business and you take certain steps you could qualify for up to $5,000 per year in tax savings? That means that you could either pay Uncle Sam up to $5,000 less up front in quarterly tax payments or withholdings, or you could get a bigger refund on the back end. You just have to know which tax deductible business expenses to look for.

Now $5,000 sounds like a lot of money so how is it possible that so many people don’t know about these deductions? More importantly, why don’t their tax accountants know about these tax deductible business expenses? Continue reading ‘Tax Deductible Business Expenses Even Your Accountant Doesn’t Know About’ »

Self employed people are allowed to deduct several expenses from their income before working out how much tax they need to pay. Sadly, most self-employed people are unaware of all the expenses they can deduct, and so most end up paying more tax than they should.

By taking the time to learn about which tax-deductible expenses apply to you, you’ll be able to claim back the maximum allowable within the law, but without increasing your chances of being audited. The following are common mistakes which many self-employed people make, and which can end up being costly in more ways than one: Continue reading ‘Tax Deductible Self Employment Expenses – 3 Common Mistakes’ »

Your tax deductions are limited by the amount of income your hobby generates. If you run your hobby as a business, your business expenses are deductible, even though they may exceed business income. The difference between a hobby and a business is a very fine line. If you deduct your losses from a business that the IRS considers a hobby, you must be able to prove that you are operating it with the intent to make a profit.

As far as the IRS is concerned, a business is something engaged in to make money. There are no requirements however that say that you must actually make money. The only rule is that you must intend to make money. If you make a profit in 3 out of 5 consecutive years it is assumed that you are engaged in the business for profit. Although the IRS can challenge the assumption, it does not usually do so.

You can choose to delay any IRS determination until the first five years are up by filling out an IRS form. However in making this decision, you must sign a waiver of the three-year statute of limitations on sideline business items for the tax years involved. If you don’t meet the presumption the IRS can challenge your deductions as hobby losses. You will then have to prove your intentions. Some of the things you may have to show are: Continue reading ‘How to Make Your Hobby Tax Deductible’ »