As an owner of a home based business, a person is also responsible for keeping track of everything they will need for filing their taxes. This is an aspect of the home based business opportunity which confuses many people, but one that is very important to understand and utilize.
Nobody wants to accidentally file something incorrectly or incompletely and risk being charged with tax fraud.
It is important to save everything related to your homebiz. There are a large number of items and services which are tax deductible when you own a home business. Part of your electric bill, rent or mortgage, and phone bill may be deductible since they are used for your business.
Part of your car payment and gas bill can also be deducted. You will want to keep track of all the mileage you put on your car, and keep your receipts when you fuel up. Keep track of which miles were for personal use (i.e. the grocery store or driving to work) and which were specifically used for your business. It is also, obviously, very important to keep track of your expenses and income related to your home based business. Keep all receipts from purchases that have anything to do with your work from home business. For example, when you buy ink and paper for your printer to print off advertisements, it is deductible. Business lunches can be partially deductible.
The cost of hardware and software relevant to your homebiz can be deductible.
However, keeping track of your income is equally important, if not more so. You need to be able to correctly report your earnings for the year to ensure you are paying the correct amount of taxes on your income.
Keep careful records and all original receipts of all sales you make.
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