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subject: Home Business - Taxes [print this page]

Most cities and/or counties require you to have a business

license and/or permit. Check with your local government

municipalities to find out what the requirements are for

where you live. Depending on where you live, you should be

able to get this information from your local courthouse or

townhall.

Zoning may also be an issue. Municipal ordinances can be

very restrictive about what types of businesses are allowed

in a residential district. This also applies if you plan on

placing a sign outside of your home. Again, check with your

local government municipalities to find out what the

requirements are for where you live.

In addition, depending on how your home business is

structured--as a sole proprietorship, partnership or

corporation--there may be forms to file with the state. The

legal structure affects taxes and the liability of the owner

and the home business, so it's important to follow the

appropriate procedures. Contact your state's Department of

Revenue for filing fees and information.

If you plan to operate your home business under a name other

than your own, you will have to register a fictitious name

with the county--usually referred to as a DBA filing (Doing

Business As). The exceptions to this regulation are

corporations and partnerships doing business under the

umbrella of the corporate or partnership name.

As a home business owner, you may be required to file

estimated tax returns and pay estimated taxes quarterly. If

you have employees, you also have to submit taxes withheld

from employee paychecks. Here are some of the taxes you may

be responsible for:

Employment taxes -- Federal income taxes, Social Security

and Medicare, federal unemployment and state income taxes.

Federal self-employment tax--Required by those who work for

themselves to cover Social Security and Medicare

contributions.

Sales tax--Each state requires a sales tax number for any

company involved in selling tangible items. Sales tax is

collected, reported and paid to the state either monthly or

quarterly.

Unemployment insurance tax -- You are required to pay

federal and state unemployment taxes if you have more than

one employee on the books for at least 20 weeks in a

calendar year, or if they have paid more than $1,500 in

gross wages in a calendar quarter.

Again, check with your state's Department of Revenue for

more information.

A home business qualifies for all of the same tax deductions

regular businesses do. In the eyes of the IRS, the only

difference between most home businesses and Fortune 500

Companies is their size, and the fact that home businesses

can also deduct many household and living expenses.

Owning a home business will entitle you to deduct thousands

of dollars in every day expenses. After all, why pay more in

taxes than you have to?

Listed below are just some of the items you are allowed to

deduct:

* Your car and car expenses.

* Your mileage.

* Your home computer, printer and other office equipment.

* Your home. If you're not a homeowner, you are allowed to

deduct the area where your home office is set-up.

* If you're a homeowner, you may deduct a portion of your

property taxes and utilities.

* Your travel expenses.

* Your restaurant meals, entertainent, dinner parties.

* You may pay wages, tax free, to two of your children, if

they are involved with the business.

* You may deduct your families health insurance. http://itshrunk.com/5ebc6d

by: Chatel Musgrove

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