Travel With Your Business

With us living in the Tampa area and all my family in New England, we don't get to see them as often as we'd like.  However, my business makes the few trips I take each year affordable!  Taking your business on the road has two huge benefits:  tax write offs and expanding your customer base or downline!

Do you have friends and family out of your immediate area?  I'm sure you do!  These days people are always on the move.  High school friends, old roommates, extended family?  Book a trip, pack your business and your family then head out!  Or make it a girls weekend and go alone! 

Expand your business to other parts of your state or the country.  Plan parties, shows, events, and informational sessions to share what you are doing.  Ask whomever you are visiting to watch for events going on in the area.  You could register for expos while in town.  When travelling for business, you may be able to write off mileage, air fare, hotels, rental cars, and some meals.  Consult with your accountant to make sure all your receipts qualify.

My two boys are now 19 months and just took their 5th flight north.  Last year the boys flew to New Hampshire 4 times between the ages of 3 months and 12 months.  Two of the trips, I even took the two babies by myself!  Some trips we celebrated baptisms and first birthdays but any excuse for my boys to see my parents and our extended family works for me!  During this most recent trip, we attended a family wedding.  How awesome that my business allows me the opportunity to be with my family during these occasions! 

While there, I book a few home shows, attend area trainings or events, meet with my downline, or talk to ladies about the opportunity my business offers.  Since I'm working, I'm able to write off my airfare.  Finding supervision for my boys while I work is much easier too since I have family eager to spend time with them!

There are many advantages to owning your own business... controlling your own schedule, the ability to take it with you, and yes, tax write offs!  Check your list of contacts, or maybe your Facebook friends, and plan a "business trip"!

-Melissa

Other posts you may like:

Business Write-Offs
Including Children In Our Business
Educating Family and Friends

Tax Professional vs. Tax Software

Preparing your own taxes is definitely doable and many people use tax software for assistance.  In last week's post, Business Write-Offs, I cautioned business owners to be careful when using tax preparation software such as Turbo Tax.  You may want to reconsider filing your own taxes if you have a large number of write-offs and deductions, or collected significant commissions and earnings.

These softwares are only accurate based on the information you provide.  An incorrect answer to one of the yes or no questions may inadvertently cause errors.  For example, I talked last week about the "home office" write-off being a red flag for audits.  The tax software will ask you if you use part of your home for business.  If you didn't know more about the requirements for a home office, you'd probably select yes when in fact your usage may not qualify.  I also talked about the fact that donations made only to qualifying organizations can be used as a deduction.  A tax professional could ask clarifying questions or see your records first hand and properly file the deduction, where the software only uses the information you provide.

A tax professional can conduct a survey of you and your business and know immediately what you can and cannot deduct or write-off.  They may catch paperwork errors or find deductions you missed.  Most people who use a tax professional get higher returns or pay in less.  You also have a physical person who can work with you should you be audited.  Tax professionals can offer tips on how you should be filing or organizing your records and what you need to be keeping.  By working with a physical person, you'll be better educated about what you can and can't do. 

Any expense you pay for tax preparation is a write-off.  You may find more piece of mind and a better return far outweighs the frustration of trying to file on your own.  If an audit is conducted and errors are found, not only will you have to pay back taxes but additional fees as well.

Click here to find a certified professional in your area through the American Institute of CPAs website.  Or, ask a friend or another professional for referrals.

-Melissa

Business Write-Offs

Taxes are often a big concern for many new business owners.  They are usually unsure of what they can or can't write-off for their business.  Here is what I know about acceptable write-offs and deductions over the years to the best of my knowledge.  Of course, you should always consult with your tax professional for the final word!

• Office equipment necessary to run your business: phone, computer, laptop, printer, fax, etc...
• Utilities that you use towards your business: phone and internet
• Office supplies: paper, ink, pens, file folders, envelopes, post-its, etc...
• Other supplies necessary to operate your business: give-a-way items for parties, order forms, tickets, clip boards, display items, rolling carts, organizational totes
• Marketing materials: catalogs, pamphlets, advertising costs
• Samples
• Postage: stamps, and any postage paid to mail documents, product, catalogs, invitations, or fliers to customers, companies, or other business professionals
• Mileage:  keep a mini calendar or log book in your car to record all mileage for business related appointments.
• Other auto expenses: tolls and parking.
• Meals: for business trips or for business meetings
• Travel expenses: flights, hotels, taxis, buses, trains, etc...
• Professional fees: start up fees, training or conference fees, credit card processing fees, vendor event fees, website fees, banking or credit card fees
• Books (education expense)
• Health Insurance and Medical expenses
• Donations- items or money
• Uniforms
• Child Care expenses
• Tax preparation fees including research publications and software costs

Appropriate write-offs should always be for business use!  There is a fine line on some write-offs or deductions.  Here are some you should tread carefully with.

• Child care "expenses" are only allowed if they qualify for the child care credit - which is a separate form (2441), not just a line item.  (See below for a link.)

• No clothing deduction is allowed if the clothing is ordinary street wear - regardless of a requirement by your profession to look a certain way.  In other words, painters are not allowed to write-off painters pants, because they are ordinary street wear.  Only uniforms and safety equipment are deductible clothing items.

• Looking professional is important but you cannot write-off any personal care items such as manicures, hair cuts, and pedicures.

• Writing-off a percentage of your home as a "home office" will raise a red flag.  Many professionals recommend this for people who have separate entrances to the office, meet with clients in this office, and do not store any non-business effects in the room.  (Check out one of my earlier posts on Audit Risks.)

• Business meals are also a red flag item.  You are required to keep the receipt along with a record of the business purpose of the meal.

Small home businesses could easily file their own taxes by completing the Schedule C form and the self-employment tax form in addition to the normal 1040.  However, using a tax professional, especially one accustomed to working with home-based businesses, can save you time and money.  Most tax professionals would not recommend using a tax preparation software.  (Stay tuned for more on this soon!)

Here are some tax document links:

1040  form                                                               
1040 instructions  

Schedule A: Itemized Deductions form                         
Schedule A instructions

Schedule C: Profit or Loss from Business form              
Schedule C instructions

Schedule SE: Self Employment Tax form                      
Schedule SE instructions

Form 2441 Child and Dependent Care Expenses            
Form 2441  instructions


A special thanks to Dawn Pettiglio, CPA, for helping me clarify a few details.

As always, if I've missed something you feel is important, or you have something to add, please leave a comment.

-Melissa

Maximize Your Savings!

Last week I featured a guest post from CPA, Dawn Pettiglio.  She has another great tip for us this week.

Maximize your savings!

If you have a spouse who receives a regular paycheck (usually required to offset the uneven flow of income for work-at-home moms) - your spouse just had a cut in his/her social security tax.  A person whose gross income is $1,000 per week is receiving an extra $20 per week in his/her paycheck. 

If you increase the 401(k) contribution to put that extra money into your retirement savings, you will maximize your tax savings.  Self employed people had their Self Employment tax cut from 12.4% to 10.4% - you can put that savings into your retirement account.


Just be careful not to exceed the maximum contribution limits.


Dawn Pettiglio, CPA, from Bradford, New Hampshire.  grayd@mcttelecom.com 

Audit Risk

With January here, we should all be preparing to file our taxes.  Dawn Pettiglio is a CPA who helps me file my taxes electronically each year.  I asked her to share some tax tips with us.  Thank you, Dawn, for being my first guest and for sharing your knowledge!

The IRS audits only about 1% of all individual tax returns annually. The agency doesn’t have enough personnel and resources to examine each and every tax return filed during a year. So the odds are pretty low that your return will be picked for an audit. And of course, the only reason filers should worry about an audit is if they are cheating on their taxes.

Audit Risks

1. Failure to report all your income.
2. Claiming the home buyer credit – 100% of these returns are reviewed.
3. Large charitable deductions compared to your income, especially if they are non-cash contributions
4. Home office deduction
5. Business meals and entertainment
6. Claiming 100% business use of a vehicle
7. Consistent losses on a businesses
8. Your business has a high use of cash
9. Foreign bank account
10. Numerous large cash transactions (near or over $10,000)
11. Math errors
12. Deductions are larger than average taxpayers

Dawn Pettiglio, CPA, from Bradford, New Hampshire.  grayd@mcttelecom.com