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Misconceptions, misinterpretations and just plain "untruths" are floating about income taxes. Believing them could be costing thousands of tax dollars!
Myth: A Professional Tax Preparer knows all there is to know about taxes so you don't have to know anything them.
Truth: Tax Preparer'sCPA'sAccountants are not uniformly informed about ALL tax laws. Most are able to file a personal income tax and know all the laws and how to apply them to personal income tax.
There are thousands of excellent, hard-working accountants doing a great job. And if you use a tax professional Fabio Borini AC Milan Jersey , maybe they have done everything possible to reduce your taxes. But many professional tax preparers are just tax preparers.
They may know how to prepare a tax return in their sleep. They know what numbers go on which form. But that's about all they know.
A good tax preparer is not trained in tax reduction strategies.
The only way you are assured to get the tax deductions you are entitled to, as a Home-Based Business Owner, is to become informed yourself.
Myth: You must "itemize" in order to take Home-Based Business expenses.
Truth: Many people misunderstand the terminology here.
When you "itemize" your income tax you file Form A&B and take such things as medical Davide Calabria AC Milan Jersey , home mortgage interest etc. You will only "itemize" if the total of Form A is over the standard deduction (for 2003 taxes?$4,700 single, $9 Cristian Zapata AC Milan Jersey ,500 married)
Some people call this filing "long form."
All taxpayers have the opportunity to itemize if it is to their advantage.
Whether you "itemize" or not has NO bearing on your Business.
Myth: You're not making a profit so there is no advantage to filing business income taxes.
Truth: This is so not true! There's many tax advantages to filing a Home-Business tax return and especially so if you are not making a profit. If you also work a job, be it part-time or full time, in addition to your Home-Based business it is especially beneficial to you to file a business tax return.
Expenses incurred in your business can be taken against your job income thus reducing your taxable dollar Carlos Bacca AC Milan Jersey , which decreases your tax liability.
Myth: Because you work a full-time job your Internet Marketing Business is just a hobby.
Truth: Only another Internet Marketer can truly understand the hours and money spent on what someone else would call a "hobby"!
The rules clearly state you have a business if you meet 8 rules. Four of the most important rules to meet are:
1. Expertise of the taxpayer or hisher advisors. That would mean your expertise in Internet Marketing or those who advise you. If you're learning and actively applying what you learn to your Internet Marketing activities and have a good "handle" on this?you qualify.
2. Time and Effort the Taxpayer puts into 'running the business'. They just want to make sure you're running a real business, not just engaging in a hobby. How much "time and effort" is enough? The United States Federal Tax Court has ruled that "45 minutes a day, 4 to 5 days a week" qualifies.
I can't see anyone who is in Internet Marketing with a profit motive not qualifying here!
3. The Manner in Which the Taxpayer Carries On the Business Activity. This one is common sense. Do you conduct your business mostly on the telephone Blank AC Milan Jersey , over the Internet and in-home presentations (these are good), or mostly at the golf course, during lunches and at the pub (not so good). Just treat your business like a business.
4. Is the Primary Purpose of your activity to 'Produce a Profit Antonio Donnarumma AC Milan Jersey ," or to 'Produce Tax Write-offs'? The best way to Pass the profit-motive test, is to have a Business Plan, and That Business Plan should include a table of Income and Expense projections Andrea Poli AC Milan Jersey , clearly showing profitability at some point in the future. Note that you are not required to actually produce a profit in order to qualify for home-business tax deductions -- just to show that you have the intent to produce a profit.
If you are doing all this then there is no reason for your business to be considered a "hobby".
Myth: You must make a profit within 5 years to be considered a "business" and file Home-Business taxes.
Truth: That's a generalization. Yes, the government would like to see you make a profit within 5 years but you are not penalized for not doing so. If you are following the above 4 rules and conducting yourself as a business you have nothing to worry about. You are a business and some businesses are not profitable for a number of years.
Myth: Learning how to reduce you taxes is hard and complicated.