Top 5 Tax Tips If You're Working From Home
Whether you're freelancing, telecommuting, or your own CEO, you may be eligible for some substantial tax deductions if you work from home.
From incorporating your small business and deducting your home office to expensing coffee and donuts (and the weight loss program to work them off), here are five tips to get you started:
1. Simplify Your Home Office Deduction.
If you have a set-aside home office, how do you properly claim it on your taxes?
In 2013, the IRS simplified the home office deduction. Previously one of the most confusing deductions for the self-employed, contractors, or small business owners, the new method allows you to take a standard deduction based on the square footage of your home office.
2. Know Your Business Expenses.
If you're working from your den or living room, or, God forbid, your bedroom, how do you distinguish between home purchases and legitimate home office expenses?
Knowing what you can and can't deduct as business expenses gets especially tough when you work from home. The standard is whether these expenses are "ordinary and necessary" to carry on your business or employment, and it's possible that you are entitled to some expenses you haven't considered yet.
3. Maintain Your Records.
If you want to expense your office supplies or that client coffee last June, how will you prove it if the IRS comes calling?
Receipts are a good start when justifying your home office expenses, but you may need additional documentation to establish a valid business connection for the purchase to be classified as a deductable expense. Keeping detailed notes and the learning the types of records to keep can save you from some future headaches.
4. Organize (or Reorganize) Yourself.
If you own your own small business, how is it organized?
Of the many ways to lower your small business's tax rate, reorganizing your business may be chief among them (though it's too late to do this for the 2014 tax year, you may want to consider this for 2015). Deciding in what form and where to incorporate your business can also have a substantial impact on the amount of taxes you'll owe.
5. Get Help From an Expert.
Do you need to call in a professional to answer some of these questions?
Knowing whether or not you need a tax expert is Step 1, and figuring out if you need a tax attorney rather than a CPA is Step 2. If you're working from home, you're probably a self-reliant kind of person, but there may be things an experienced tax lawyer can do that you can't.
There might not be any way to remove the stress of tax season, especially if you're working from home. But these tips may be able to add a few bucks to your bank account come filing day.
Related Resources:
- Need help with your taxes? Get your tax issue reviewed by an attorney for free (Consumer Injury)
- 5 Questions to Ask a Tax Lawyer (FindLaw's Law and Daily Life)
- Ten Ways to Lower Your Taxes (FindLaw)
- Working from Home? Tips for Telecommuters (FindLaw's Strategist)