Looking at tax issues

As you can guess, there are plenty of things to know about the IRS's requirements and limitiations when it comes to self employment. The Schedule C is the sole proprietors business tax return. Your first adventure into filing your income taxes for your business will be daunting. This is the reason for so much planning when you prepare to start a business and as you run your business.


Most of what goes onto a Schedule C will be fed by the income and expense accounts you've set up based on some of my other posts. If you choose to prepare your own tax returns, it will be a good idea to check out the form for the most recent year so you can get a look ahead at what you will need to prepare to complete the form as smoothly as possible. The web site for the IRS will have the form you'll need. They come up with them; they ought to have them!!!


Two other items that will be important when you prepare your business tax return - sole proprietorship, partnership, corporation or whatever. One is depreciation. This is for calculating the devaluation of your fixed assets based on wear and tear, using a "useful life" in number of years. Don't miss this expense! When you have equipment or other property that wears out, depreciation will let you take advantage of this loss of value and you don't spend money for it. It also reduces your tax liability when it has been included.


The other thing to make sure to take advantage of is business use of your personal vehicle. If you can't afford a new vehicle right off the bat, using your personal car for business purposes is legitimate and will help you save some tax money. The annoying thing about this for a lot of people is due to the hassle of writing down the starting and ending mileage on your odometer so you can claim mileage expense. This is expense is a great benefit because the IRS allows you to claim 48 1/2 cents per mile for every business mile you use your personal car. 100 miles means $48.50 in expenses, reducing your taxable income. That makes it worth doing the paperwork!!


One warning: Keep your records of this expense. The IRS wants you to be able to prove your claims for use of your personal vehicle for busines purposes. The IRS Form 2106 & Form 4562 are used for depreciation and mileage expenses.


Well, the day is over. I have to quit for now. Keep in touch. Have a good weekend!


Gary