Home-based Business

This is the transcript from our home-based business chat about taxes. Our weekly home-based business chats are done in cooperation with a networking email list called HNA (Home, Not Alone). This group is a support network for home-based business owners.

*Important Disclaimer*
None of the people involved with this chat are tax experts or tax accountants, and some information might not be correct. Please check with your own accountant before using any of the ideas discussed here.

-- Log on HNA012699 started at Tue Jan 26 12:15:43 PST 1999

TriciaB: Smart Moneys Tax site at www.smartmoney.com/ac/tax.

homeparentsADM: another good site I found today is from the About.com ..desktop publishing...the address is... http://desktoppub.about.com/library/weekly/aa981023-2.htm

Julie: http:// www.irs.gov/forms_pubs/

TriciaB: It is a good site for all kinds of tax and financial info!

Julie: they have all the forms and publications for download along with tons of tips

TriciaB: My newspaper gave two other sites in an article this morning. They are www.taxweb.com and www.1040.com I hadn't got a chance to do anything but make sure the addresses were valid!

Julie: that is the turbo tax site, you can even do your taxes online

homeparentsADM: I use Turbo Tax..love it!

homeparentsADM: could we discuss some deductions people might forget about? For example, I think a second phone line for Net use should be deductable..

TriciaB: We have a friend who is a tax preparer who gives us all the help we need. Lucky I guess because she doesn't expect payment!

Julie: one last url is http://www.ey.com/

Julie: it's always best to work with a professional

LadyDiBz: Turbo Tax software is an excellent way to do your taxes. I did mine that way last year.

TriciaB: I would miss alot of stuff if it wasn't for her running down a check list.

Julie: it's definitely a good alternative if your business is small..

Julie: but you can pay $40 for software and get an accountant for the same amount of money who is available to answer questions and flag errors and make suggestions, even better than software can.

TriciaB: My small business development center here locally has free walk in hours for questions with a CPA.

Julie: A really terrific book is "Money Smart Secrets for the Self Employed"

LadyDiBz: It costs less with Turbo Tax we do rapid refund and that costs us almost $200 to pay the preparer and the cost of the rapid refund.

Julie: Barb, since your pay is contractor based, it should be pretty simple either way, you get a 1099

LadyDiBz: If I purchase Turbo Tax I can do my own rapid refund on the net and the cost of the software so my total cost is about $50 compared to $200

Julie: obviously it depends on your business, how large and complex your taxes are, etc and how large your tax bill is.

Julie: Not everyone is getting a refund, many of us will have to pay estimated taxes this year

homeparentsADM: right, but I always wonder exactly what to deduct..with the daycare it was pretty clear..groceries, food, part of my utilities and mortgage..

Julie: For you., Barb, you can deduct the tools you require to run and promote your site.

homeparentsADM: I was negative last year, after deductions..so I think that will carry-over to this year..I hope anyway..

Julie: Barb: what do you mean "carry over"?

Julie: last year is over

homeparentsADM: the loss I had from last year..won't that carry-over to this year? or not..

Julie: no

homeparentsADM: oh...I thought it would...

Julie: your loss was claimed on your taxes last year. This tax year starts with Jan 1st and ends with dec 31st

homeparentsADM: I had two home businesses last year..went negative on the daycare, since I only had one kid to watch...

LadyDiBz: I will still be at a loss this year after all of my deductions from software postage phone bills etc....

Julie: Lady is this your second year?

LadyDiBz: Yes

homeparentsADM: oh, one thing I've heard about losses for the year..you can't have more than a certain number of years of losses, or it's considered a hobby?

Julie: that is good then.. take all you can get

TriciaB: I was told 3 years to lose?

Julie: correct, Barb 3 years

LadyDiBz: Yes I plan too. I am sure this is my last year at a loss. :)

TriciaB: Lets start planning our profits :-)

Julie: I took everything in my first year, bought all my equipment and unfrotunately didn't have much this year

Julie: I would have loved to have had more large deductions this year

homeparentsADM: would it have better to spread the buying of equipment out, do you think, Julie?

LadyDiBz: I did a lot of additions this year and my long distance phone bills have been outrageous.

Julie: No Barb, for me, I took advantage of all of it..

Julie: I could have spent more this year though.

homeparentsADM: but you can deduct even expensive stuff yearly, I think....last year I took my laptop that I bought just for the About.com off as a section 179 expense

Julie: Barb, that book I mentioned, you can get it from the library or amazon.. it is worth reading

LadyDiBz: I will already have more deductions for this coming year I just bought a laminating machine.

homeparentsADM: I guess another thing is to think about percentage of business use on things you deduct...

homeparentsADM: for instance, my kids and husband use the Net at times, so maybe I should just deduct 80% for my business use...

Julie: Barb, you should keep a log

Julie: if you share the computer and the lines, it is more sticky

homeparentsADM: good point, Julie

Julie: it's just like a car with your mileage log

Julie: that log is used to determine the amount you can deduct

Julie: those are the things a good accountant will ask for

homeparentsADM: for new home business people, I think my number one piece of advice would be to keep good records..keep all receipts, etc..

homeparentsADM: Julie, how about if I"m online, but just chatting..not working?

Julie: oh and on a non business topic, keep every single home receipt FOREVER

Julie: Barb: then you are just chatting.. not work

Janet: are you chatting about work, Barb ... or something that could lead to more work?

Julie: My parents sold a house after 50 years.. bought it at 10k sold it for 90k.. now they are trying to find 50 years worth of receipts to reduce the capital gains tax

homeparentsADM: this is a bit confusing...now..if I'm sleeping, I would have to take that time off the monthly ISP bill...right?

Julie: no barb...

TriciaB: Can you log your online usage, wether business or personal?

Julie: I will be paying quarterly this year for the first time, I'm not looking forward to it

homeparentsADM: is there any way to know ahead of time if you will have to pay quarterly taxes for the upcoming year?

TriciaB: I have to declare and pay my state sales tax recieved twice a year. But it actually is easy filing.

Julie: yes, the irs site has the figures there

Jay: I think it's if more than 10% of total tax bill was not paid by withholding, you have to pay estimated tax in the next year

Julie: Barb: you might be able to avoid it by having your husband have more taken out

Julie: homeparentsADM: yeah, we usually get small refunds so far..

homeparentsADM: Jay, are you a About.com guide, or just an interested person...

Jay: I'm not a guide, although I've asked miningco about opportunities... thus far nothing's a good match for me. I am a work-at-home father though

TriciaB: What is your business?

Jay: I live in Mexico City and provide translations and info services to a US legal publisher
Jay: What do you all do?

TriciaB: Oh that sounds really great.

TriciaB: Are you a US Citizen or?

TriciaB: I guess so if you pay Uncle Sam :-)

homeparentsADM: neat Jay..I just do this About.com site, and kind-of daycare from my house..just one child I'm watching now

Jay: Yes I am a US citizen, my wife is Mexican. I can apply the foreign earned income exclusion but pay the SE tax

homeparentsADM: (From Julie:) there it is...this is on estimated tax information http://www.irs.ustreas.gov/prod/tax_edu/teletax/tc355.html

TriciaB: I do Office Support Services.

Julie: I have heard that it is a great deal when you live in mexico and work in the us

Jay: It works out pretty well, but better if you are an employee. I'm an independent contractor

homeparentsADM: Is there anyway to get around the self employment tax? Other than earning less than $400year

Jay: Incorporate

Julie: ahh.. that's true

Jay: Actually that's not true, you'd still pay the same tax

homeparentsADM: that's what kills me..the SE tax..

Julie: Well it helps that your husband is an employee

homeparentsADM: yeah, so we can make up for it...

Julie: and you do have a lot of deductions, especially with the in-home daycare

homeparentsADM: oh yeah, I can deduct lots of home business expenses, with no red flags.

Julie: that helps...

TriciaB: Not to mention toys, Barbara!

homeparentsADM: yup!!! I deduct all the toys, believe me!

Julie: your books, magazines related to parenting

Jay: Can I deduct Elmo's Workshop CD Rom as an employee training product? After all my daughter occasionally answers the phone...

TriciaB: How about a deduction toward employee liesure benefits?

Jay: Or "company" outings to Disneyworld?

Julie: I'd love to deduct the things I use to keep my kids busy so I can work...

Julie: it is amazing though, you can work out some pretty nice deductions if you hire your children

Jay: My daughter's school is literally down the block from where the pope was staying here, and needless to say last week she didn't have school. I wonder if our Burger King run can be deducted as an "act of God"

Julie: and your spouse

-- Log stopped at Tue Jan 26 13:49:12 PST 1999