Business Tax Savings

Tax Assistance For Home-Based Businesses
by Yank Elliott, MBA & IAHBE Staff Writer

Beware the Ides of March! All Julius Caesar had to worry about was assassination. As a home based business owner, you have to worry about the IRS and the dreaded April 15 deadline for filing your income tax return.

Assuming you have the records of income and expenses, it may not be as bad as you think. There is a lot of information, advice, and even help to get you through this ordeal. Much of it is even available free. Read this article and you will save time by having many sources available to you in one place rather than having to search all over the Internet to find the help you need.

Having your own business may require filing a Form 1040, Schedule C, and perhaps Schedule SE. A good place to start your filing process is to see what you may need at 1040 Central. This page will point you to a lot of information sources; here are the most important:

Tax Relief in Disaster Situations - There are provision for tax reduction for victims of several natural disasters occurring in 2005. Among these are Hurricanes Katrina, Rita, and Wilma. There are also provisions related to wildfires, floods, and tornadoes.
Self-Employed Individuals or Independent Contractors - This discussion will help you decide how to file your Income Tax Return. Generally self-employed or independent contractors must file some kind of business return. If you are neither of these you just need to file as an employee which may change the required forms as well as the types of expenses allowed.
Forms and Instructions - Here you can download every form along with related instructions the IRS has. You need a computer and printer as well as the Adobe PDF reader which is available on this site. This is very convenient and saves the time and trouble of requesting the forms or visiting some library or Post Office. It’s really nice if you overlook one obscure form and you file at the very last minute. Just pull the form from this Website. This could be the only time the IRS is your friend!
Business Expenses - This is an overview of allowable deductions that may be available to you. Please note all the items require records to substantiate any expense you claim. These expenses all relate to some types of income your business may receive including products produced or inventoried by you, rental income, payments for services performed, and affiliate income. A complete list is in PDF Publication 535 Business Expenses.
Electronic Payment Options - This is a convenient way to pay any kind of tax you may owe entirely over the Internet. Of course you can still pay by check or money order using snail mail.

That’s nice, you say, but how do I know how much I must pay? Well, you have to first file a tax return and there are several ways to do this. We’ll discuss each of these:

File the return yourself
Paper forms by mail, get forms here
Free online
Paid online
Free volunteer filing
Paid professional filing

Filing a return by any means on your own may be a daunting task. There’s a lot of stuff to read and understand and who are you going to ask questions? This can be overcome to some extent using the paid services. Most have some checking services available as well as question answers usually for a small extra fee. I file my own return without the software because I have been a professional preparer in the past. I think most people should at least use one of the paid online software programs (or buy the program in a box). An advantage of buying in the box (or downloading) is that you won’t have to put your Social Security number where anyone might be able to see it.

Here’s a caution about using any service, free or paid. If the provider promises anything that sounds too good to be true beware. Tax filing is unpleasant even if you owe little tax. A guaranteed refund or a promise of no tax is impossible; go somewhere else.

Here are two Websites you should read before choosing anyone to prepare your return:

Tax Preparer Fraud explains illegal practices sometimes used to understate income or inflate expenses and other deductions. Not only do these practices break the law they also put you, the client, at risk of illegal activity and several kinds of fines.
Definition-Abusive Return Preparer discusses some additional illegal ways paid preparers may try to achieve low taxes for clients.

In spite of all the help available, there are some situations when you should always seek qualified professional help with your tax return. The professionals required are a CPA, tax attorney, Enrolled Agent (certified to represent clients to the IRS), or well qualified commercial tax preparation firm. Some of these circumstances are:

If you are buying a business
When you purchase expensive assets for business use
If real estate is a substantial part of your business
If you have more than two employees (you may have special reports, insurance requirements, etc.)
When you owe back taxes, have a dispute with the IRS, or have tax liens

For free filing online, the IRS has formed a partnership with many software companies called the Free File Alliance Companies. Generally these companies allow free filing for Adjusted Gross Income of $50,000 or less (a few require less than $29,000). To use one of these companies free be sure to go through this IRS site; using the main Website of one of these companies may not allow you to use the free offer. There are so many of these companies I would suggest you use the “Guide me to a service” button at the top right of this IRS page. This will narrow the field so you can examine a few companies to decide which one has the best offer for you.

Paid online filing services offer additional benefits and features for prices beginning at about $10. Some of these offer live consultation usually with a small extra fee. This is by no means an exhaustive list nor are there any recommendations made. Some names like H & R Block will be well known to many. My suggestion is to compare three or four of these for price and level of services provided. Pick the one you feel will serve you best; most of them allow completion of your return before you actually have to pay when your return is filed. This should tell if you picked the right company. Here are some online for-pay filing companies:

FileYourTaxes.com - An important benefit of this program is the ability to re-file returns due as far back as 1998.
TurboTax - There are three online versions starting at $9.95. A download version also is available from this site beginning at $19.95. The online versions are free to try; pay only when you file.
Payment plans - Provides help with payment plans and back taxes.
H & R Block TaxCut - Three plans beginning at $9.95 with occasional special pricing. The $99.95 version includes your return signed by a tax professional.
ExpressTaxRefund.com - Basic package starts at $29.95 with add-ons covering special forms you may require. If you think you may need some unusual forms check out this site.
Tax Prep & Accounting Services - Prices start at $9.95. You can get quick online answers to questions for a small fee.
CompleteTax - This is a product of Commerce Clearing House (CCH) a well respected tax and legal information company. Prices begin at $24.95; they also do state taxes. Personal service is available for a small fee. The site has a Tax Projector for future taxes and other financial calculators.
TaxEDGE - Price is $19.95. They advertise online help comes with the program.
Taxslayer.com - Online cost is $9.95; download is $19.90. Both plans offer state return free. They offer online customer service.
Taxbrain - Prices start at $19.95. They also file state returns and provide live customer support along with an accuracy guarantee.
Big Fat Refund - Basic price is $24.99. They will file many other required forms for additional fees. They advertise unlimited help.
Taxengine.com - Federal return or a state return is $19.95; Federal and state return price is $29.95. Either price includes every form or schedule required for a Federal return; this seems to be a better deal than some other services which require extra fees for some forms.
Tax Help - This is a list of sites some of which provide help with tax debt relief, tax disputes, and other problems as well as preparation.
AlltheServices.com - Has a list of some city and state tax preparers.
Tax Directory-Online Tax Preparation - This list contains some services not covered elsewhere. Some of these links no longer work.

There are two volunteer programs providing free tax services to people with income of $38,000 and less and for people age 60 and older. You can find these here.

Here are some professional tax preparers with offices you can physically visit:

H & R Block - Use your zip code to find an office near you. Look in the banner at top right. You may qualify for an Instant Money Refund Anticipation loan at one of these offices.
Jackson Hewitt Tax Service Office Locator - Use your zip code.
Bookkeepinghelp.com - Here are many tax preparation offices operated by various kinds of professionals. You may find one in your area.

Relax, and have some fun with the IRS this tax season!

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© Yank Elliott. All rights reserved worldwide.
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Yank is a home-based entrepreneur and freelance business writer living in Hurricane Alley, North Carolina, USA. His Website is www.furriwhalesworld.com. Contact Yank at globalbiz@furriwhalesworld.com.