When someone is operating a home business, it is important to keep their business transactions and their personal transactions separate. There are many reasons, but one of the biggest reasons is due to income taxes. The IRS will considerate an improperly ran business with improper paperwork just a hobby and will limit the amount of deductions that a person can take for their business. This will hurt a business owner at tax time. There are a lot less acceptable tax breaks for a hobby than there are for a business.
How To Keep Your Business Separate
When you are operating your own business, be sure and have a separate account or credit cards from your business and your personal. Number one it looks unprofessional if you are paying a business account or a vendor with your personal credit card or check. Many professionals may not take you serious. This could hurt your business and the possible line of credit for your business. If you need to put some of your personal money into your business account to cover your expenses, them make sure that it is documented as a loan to the business or as an investment into your company. What about your pay, make sure that you write a check paying yourself a reasonable pay scale, but make sure that it is clear that it is a payroll check as you are an employee.
Some Business Tax Breaks
If your business is in your home the portion you use as a business can be a tax write
Any business supplies
Any products or purchases made for the business
Any payroll that is paid out to employees
The Importance Of Keeping Separate Records
Keeping your personal finance and your business finances separate is very important. As you can see it can make a great difference in your taxes, but you must have the proper paperwork to support your expenses. Once you get into the habit of doing this and keeping track of all your expenses, it becomes easy. When you are first setting this up you might even want to get the advice from an accountant or the person that prepares your income taxes to ensure that you are getting all of the breaks that you have coming to you. Click here to see financial checklist.
There are software programs that you can use to keep track of your expenses for your business. If you prefer the old school way, there are ledger sheets that help you to keep a running total of all expenses for you to take to your tax preparer. This is much easier than trying to find every receipt at the end of the year and hurry to meet the deadlines to get your taxes filed. In the beginning this can all seem complicated, but the more you learn, the easier it gets. Take the time to learn what the proper procedures and forms are that are required to keep your home business running smoothly. check pros and cons of transaction work at http://www.work-at-home-business-idea.com/transcription-work-pros-cons/