Business Tips . . And Information

 Business Tips. . . And Information for New Business, Home-Based Business and Established Business Owners

When you or I write a check there must be sufficient funds in our account to cover that check, but when the Federal Reserve writes a check, it is creating money.

– Boston Federal Reserve Bank

Businss Tips & Information

– Just so you know


1.  Business Tips:  Start-up Operating Cost Facts

. . . Did you know that the expenses that you make before your business starts operating are not all allowed as current deductions?

In general, these business tips for beginning start up expenses have to be amortized over a period of 180 months starting in the month that the business starts.  Thank congress for passing a bill that lets a  business apply to use the beginning expenses up to $5,000 (currently), with balances over $5,000 amortized over 180 months. If you want to deduct bigger larger portions of your initial start up cost your first year in business, Beginning business owners normally like  to begin operations as soon as they can and wait to on create at least a few expenditures until after their business starts.

2.  Business Tips:  Business Or Hobby, But Not Both.

Some folks would rather earn a living doing the things they enjoy.  Is your business a hobby or a business? Business Tips – A hobby is an activity that you don’t expect to be making any profits from.  To operate your business – or any business as if it is not an investment activity that you are earning an income from, then you definitely are decreasing the deductions it is possible to take.

You have to include with your income tax return any income you earn – even from an activity you do not expect to make a profit on. Business tips example:  A garden you sell vegetables from, but you primarily run your garden for personal satisfaction and fun. You can’t use a loss from the activity to offset your other income. Hobbies, or activities that consist of something you do mainly for exercise or fun, are ‘unbrella’d’ under this title. So does an investment activity intended only to produce tax losses for investors.

Business Tips To help you decide whether or not you are carrying on an business for an income, all facts are relevant. Not one single factor would decide. Among these business tips facts are these guidelines:

  1. You conduct the duties of the activity as a business,
  2. The time and energy you give to the business or duty indicates that you have intentions for earning a profit,
  3. Your existence and welfare depends on the profits of your business.
  4. Your losses are because of conditions beyond your control (or are normal in the start-up phase for your type of business),
  5. You change your methods of operation to improve profits,
  6. You, or your advisers, have the knowledge you need to carry on that activity as a successful business
  7. You were successful in making a profit in similar businesses or opportunities in the past
  8. The business makes a profit in some years and the amount of profit it makes, AND
  9. Primary business tips assumes that You expect to make a future profit from the appreciation of business assets used in it.

3.  Business Tips: Tax Schedule-Shorter is Better

Your business might qualify to use a shorter version of Schedule C – that would be the  Form (or Schedule) C-EZ versus the longer Form Schedule C when you are reporting the business income profit & loss on the federal income tax form, per the IRS. That’s mainly because the stated deductible business expense threshold for filing Schedule (form) C-EZ of the Form 1040 is $5,000. This change lets an extra 500,000 qualifying small business file the C-EZ form instead of a Schedule C.

Schedule (form) C-EZ, Called, “Net Profit from Business (Sole Prop.)”, is a simpler version of Schedule C, Profit or Loss from Business (Sole Prop.).  Schedule (form) C-EZ includes a page with instructions, plus a 1-pg. form that has 3 short parts –

  • General Information
  • Calculate Your Net Profit
  • Information about Your Auto

The business tips instruction page also has a worksheet to calculate deductible expense amounts. If that amount does not go over $5,000, you should be easily capable of utilizing Schedule (form)C-EZ versus Schedule C.”

4.  Business Tips:  Home Office Deduction

Depending on if you are an employee or are self-employed, if you use a portion of your home solely, have regular business hours and that home office area is solely used for business purposes, these business tips can help you decide if you can able to take a home office deduction.  If you have shared areas (for example a shared hallway or bathroom area, then the write off for those areas are calculated based on a percentage of use to business-to house).

Yes you can take the deductions for specific expenses if your home office truly is the primary place where your profession or business is conducted or where you meet and deal with customers or patients in the day-to-day operation of your business. If you use a  structure that is separate and not attached to your home for your exclusive and regular business use then you can deduct all the expenses related to that structure.

Your home office qualifies as your primary place of business if you use it solely and routinely for business activities connected to your profession or business. There has to be no other fixed area or place where you conduct substantial business duties – Business Tips Example, the hospital provides your office space for you. If you use your home and also use other locations regularly in your business, then you have to decide which one of those locations is your number one place of business.   This would be based on the level of significance or the importance of duties you perform at each location. If these relative importance rules do not help you decide where your principle business area is then use this business tips guideline – Consider the time you spend in each of the locations you do business in or at.

If you are an employee, you have other requirements also. You may not take the home office deduction unless the business use of your home is for the sake of your employer. And, you may not take the deductions for a space that you are renting to your boss. You may, however be required to report rental income to yourself – Business Tips warns you about this Slippery Slope (this one).

Generally, the amount you can deduct will depend on the percentage of your home you used for business. Your deduction can be limited if your gross business income is less than your total business expense/s.

5.  Business Tips: Earned Income Tax Credits-You May Qualify!

Crucial tax credits are lost every year  by people not filing a claim for Earned Income Tax Credit (EITC), a federal tax credit for people who do work, but do not have high salaries.  Any taxpayer who qualifies and claims that tax credit could potentially pay less federal tax,or  they could also end up paying no tax, or they may even get tax refunds that they had not counted on or planned for.

Just last year, approximately twenty-one million taxpayers were given around $37.5 billion in EITC.   Business Tips Estimates – According to IRS estimates, this number is only twenty-five percent of the individuals that qualify and yet those people don’t claim the credit.  While also,  the IRS reports that millions of people that have claimed the same credit in error, because they simply do not understand the rules.

EITC is based on the amount of your earned income and the amount of qualifying kids in your house. If you have kids, they have to meet the relationship, age and residency requirements. And, you have to file tax returns to claim those credits.

Check to see if there are any increases in EIC for employees with three + children.

Also check to see if you are eligible for EITC based on the minimum guidelines:

  • For complete information on income levels, rules and regulations and definitions on qualifying children, American Recovery and Reinvestment Act and maximum credit amounts see the IRS EITC Home Page HERE

6.   Business Tips:  Qualify Start-Up Business Expenses

. . . Did you know that the expenses that you make before your business starts operating are not all allowed as current deductions?

In general, these beginning start up expenses have to be amortized over a period of 180 months starting in the month that the business starts.  Thank congress for passing a bill that lets a  business apply to use the beginning expenses up to $5,000 (currently), with balances over $5,000 amortized over 180 months. If you want to deduct bigger larger portions of your initial start up cost your first year in business, Beginning business owners normally like  to begin operations as soon as they can and wait to create at least a few expenditures until after their business starts.

Business Tips: Are you eligible for any of these tax credits?

SEE Business Tips PAGE 2


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