Happy Monday…. It is March and I am still putting together my tax information. Hubby and I have been talking a lot of the “business” side of my business. Crazy considering that I have been in business for over 3 years. This year is THE YEAR to show a profit (on paper) – documentation, tracking and budget awareness are key. Next step is making sure that I am getting all of the tax-advantages available for home-based businesses. Yes, I still do my own taxes. I keep saying when I am bigger, I will get someone to do them. That time is quickly coming (thankfully) but this year, I will again do them myself.
I don’t profess to be an expert at any of this but over the next few weeks I wanted to share information that I have gathered with the help of Ron Mueller and others.
Let’s start with the basics… There are THREE prerequisites that you need to meet in order to qualify for any special home-business deductions:
Number 1. Work your business on a “regular and consistent basis.” That’s Tax Code language. It means work your business at least 3-5 hours a week, week-in and week-out. (Make notes on your calendar or day planner to prove it.) AWESOME! I meet the first one. Hubby would say that I do that every day & my planner keeps me on track.
Number 2. Show a profit for your business on your tax return, OR be able to prove you are working towards making a profit. Either one is acceptable. If your business is losing money for multiple years in a row, there is a list of actions you can take to “prove” profit-intent. YES, I am working towards a profit. Who knows when I finish my taxes this year, I may have one.
Number 3. Keep IRS-compliant records. This is not difficult, but it IS important! I probably keep WAY too much but I always want to be ready in case the IRS comes for me.
Do you meet these 3 requirements? If so, you may be eligible as a home-based business. This year we even “ThirtyOne-ified” the office. When you walk into it, you know that it is my office and this is where I work when I am home. Do you have a space that is dedicated just to your business? I have been blessed with my own office but not everyone is. Just make sure that you have an area that you can call your own to work (a closet, a desk, a corner, whatever).
If you meet these 3 requirements you may have a business and not a hobby. My hobby is now by “crafty” angels while Thirty One has become my full-time business.
Tell us about your business or your hobby. I would love to have you share with us. Have a ThirtyOne-derful day!