Earlier this week, like many Americans, I spent a couple of evenings finishing my tax returns. The biggest difference between mine and a lot of others doing the same thing at the same moment is that I work from home, in a business that I am the sole proprietor of.
I actually don't find doing my own taxes to be very difficult, even with all of the additional forms I have to fill out because of my writing business. If you find it difficult, or if you haven't filed for your own business before, here are a few tips to help you out.
- Keep track of income and expenses throughout the year. If you don't keep track of your business income and expenses, you will have twelve months of it to do all at once at the end of the year -- and that's a good way to end up overlooking payments or expense receipts in your final tally. I like to keep an Excel spreadsheet with a running tally of all my income and expenses, so that all I have to do at the end of the year is input the totals into my Schedule C.
- Think twice before taking the home office deduction. This business expense is supposedly a red flag that can trigger an audit, although if the cost of running a home office is a genuine business expense, that shouldn't prevent you from claiming it. Just be sure you really can back up your claim. Remember, the space you are claiming as a home office -- whether it's an entire room or just part of one -- must be used solely as a work space for your business. That means no personal bills or files in your desk, no games on your work computer, and so on. There are other reasons to be cautious about taking this deduction, too -- be sure you read and understand tax law concerning the home office deduction to the fullest before claiming the expense.
- Make full use of the technology available to you. Technology can make filing your tax returns so much easier. You can scan receipts and keep digital copies of everything, tally income and expenses with software on your computer, and even fill out tax forms and submit them online or use a software program to figure it all out for you. Technology can eliminate the need to use white-out or stand in line at the Post Office on Tax Day, so take advantage of everything that helps you file your return faster and easier than in the past!