Finally Financial Organization
This is the third part of our organizations series. Once you’ve tackled your space and your time and your “to-d0″ list it’s time to straighten out your bookkeeping. Many people with home businesses get overwhelmed when it comes to taking care of their business finances and their home finances. It really is important to get a handle on this. One of the main reasons is taxes. I’m not an accountant or even professional bookkeeper, so keep that in mind as you read on. What I do know from having multiple home businesses and having filed taxes for the last 15 years as a sole proprietor is, you need a system.
The reason you need is system is that many of your business expenses are tax deductible, but only if you can prove them. In addition, you need to keep track of your income and your outgo in order to determine what taxes you need to pay. (Here is where you go and talk to your accountant). What I’m going to help you with is creating the system.
First keep all receipts, write down all appointments and milage, list any expenses. Even if you do all this in simple notebook with a calendar and a big envelope for receipts, you’re doing well. Keep your home finances separate. If you work out of your home and plan on deducting part of those expenses, speak to your accountant about how to keep it all clear. There are many computer programs that will organize it all for you. If you have one of those, great. If not, the old fashioned way works fine as well, as long as you do it.
I find it useful and the IRS likes to see, separate checkbooks for business and home. If you have a number of businesses, have a checkbook for each. Even if you don’t make sense of everything until tax time, just having money go in and out of the correct location streamlines the process substantially.
One of the beautiful things about home based business, particularly selling-type businesses, is the deductions. Again, talk to your accountant for the details but the IRS is aware that it takes a few years for a new business to turn a profit. As long as you can show that you are working in the business to make a profit, not just as a hobby you can deduct those expenses for a number of years even if your business has a loss. This type of thing can often offset other income coming into your household and lower your overall taxes.
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