Monday, February 04, 2008
If You Operate A Home Business Online or Offline, Don't Even Think About Hiding From The IRS
Before I get into the meat of this article I want you to know that I am not an accountant or a CPA. All statements below are based on my many years of running my businesses from home.When the subject comes up I always make this fervent wish: "May you pay $1,000,000 in income taxes!"
Think about it. That would be a fantastic blessing, would it not?
Even though I look for ways to boost my business earnings, I would never consider cheating the IRS. It's wrong and it's not worth the stress ulcers. Besides, it's such an unnecessary risk. When you go down that road, you'll always be looking over your shoulder, wondering when you'll hear the knock at the door. Keep your peace of mind. This will help you be very successful in your business.By paying our self employment taxes you are also building up your social security retirement income. Talk to your accountant to learn more about that.
First and foremost, the IRS gives you enough room to roam as far as your write-offs. Why take a chance and make your life miserable when you get a call from the IRS? My experience in life tells me that the IRS gets more angry if you understate your income than overstate your expenses. I'm not by any means suggesting that you fib at all with your expenses. Just put the maximum into the form that you honestly believe are allowed. Usually that will keep you out of trouble.
But if the IRS gets wind that you intentionally understated your income, then you better be worried.
The idea of "innocent until proven guilty" doesn't work with the IRS (as it really does not work in the court system, but that's another story). If you make any regular online sales, you might have to persuade the tax man that you don't have an online business. And it will definitely be up to you to do the persuading. I wouldn't worry much if I sold a couple of items after cleaning out the basement. In fact I don't know the IRS rule on that.
But if you sell stuff regularly then be sure to claim the income from those sales.The IRS is finding new ways to hunt down online payments, even though it's not very easy. There are dedicated teams currently probing the internet (and Ebay) searching for clandestine online businesses.
Be aware: if you have any online money deposited into your bank account, the IRS can trace it. So, even if you're feeling lucky, don't try to pull it off. And don't try the "ignorance of the law" routine. It's never worked yet, and it won't work in the future.
Protecting Yourself
If you are looking to get started in online business, there are several things you can do to protect yourself. Don't go the path of many internet businesses who are so caught up in getting started that they overlook the things they need to protect their company. Even if you're simply an employee, an individual, you also need to know how to protect yourself.
Keep thorough records. This is the easiest and best place to start when it comes to protecting yourself. Records are the first line of defense for any snags that arise from your online work. Make sure they're detailed and accurate, containing all the information you might need if the IRS comes looking for you.
Financial records are a must. If you don't know how to prepare them, or if working with financial records makes you uncomfortable, hire an accountant. There are several in your city, or you may even choose an internet accountant.
No matter which route you choose, the sooner you start keeping financial records, the better. Don't wait until you've been in business a year before you start bookkeeping!
If you make transactions online, many sites (such as Paypal and Clickbank) will give you access to transaction logs so you can keep track of your income and expenses. So do it yourself or hire someone else. It doesn't matter which, just do it!
In addition to financial records, you will need to keep track of other information related to your business. Keeping these records on your computer is a convenient way to find the details you need at a moment's notice.
Set up individual files for these areas:
Business connections. Personal details such as name and address, phone, email, company name, and conversation notes can prove to be invaluable later on.
Media connections. Again, keeping personal details such as name and address, phone, email, media type and name, and conversation notes will come in handy for future reference.
Business proposals you have submitted and obtained. All contracts you have accepted! You will find this to be a valuable personal reference, especially if your business takes off and you forget what you promised to whom.All written material (such as ebooks or articles) you have submitted to a buyer and the outcome of those jobs.
Certainly you can think of more items that need to be filed. Consider this just a start.
Think about it. That would be a fantastic blessing, would it not?
Even though I look for ways to boost my business earnings, I would never consider cheating the IRS. It's wrong and it's not worth the stress ulcers. Besides, it's such an unnecessary risk. When you go down that road, you'll always be looking over your shoulder, wondering when you'll hear the knock at the door. Keep your peace of mind. This will help you be very successful in your business.By paying our self employment taxes you are also building up your social security retirement income. Talk to your accountant to learn more about that.
First and foremost, the IRS gives you enough room to roam as far as your write-offs. Why take a chance and make your life miserable when you get a call from the IRS? My experience in life tells me that the IRS gets more angry if you understate your income than overstate your expenses. I'm not by any means suggesting that you fib at all with your expenses. Just put the maximum into the form that you honestly believe are allowed. Usually that will keep you out of trouble.
But if the IRS gets wind that you intentionally understated your income, then you better be worried.
The idea of "innocent until proven guilty" doesn't work with the IRS (as it really does not work in the court system, but that's another story). If you make any regular online sales, you might have to persuade the tax man that you don't have an online business. And it will definitely be up to you to do the persuading. I wouldn't worry much if I sold a couple of items after cleaning out the basement. In fact I don't know the IRS rule on that.
But if you sell stuff regularly then be sure to claim the income from those sales.The IRS is finding new ways to hunt down online payments, even though it's not very easy. There are dedicated teams currently probing the internet (and Ebay) searching for clandestine online businesses.
Be aware: if you have any online money deposited into your bank account, the IRS can trace it. So, even if you're feeling lucky, don't try to pull it off. And don't try the "ignorance of the law" routine. It's never worked yet, and it won't work in the future.
Protecting Yourself
If you are looking to get started in online business, there are several things you can do to protect yourself. Don't go the path of many internet businesses who are so caught up in getting started that they overlook the things they need to protect their company. Even if you're simply an employee, an individual, you also need to know how to protect yourself.
Keep thorough records. This is the easiest and best place to start when it comes to protecting yourself. Records are the first line of defense for any snags that arise from your online work. Make sure they're detailed and accurate, containing all the information you might need if the IRS comes looking for you.
Financial records are a must. If you don't know how to prepare them, or if working with financial records makes you uncomfortable, hire an accountant. There are several in your city, or you may even choose an internet accountant.
No matter which route you choose, the sooner you start keeping financial records, the better. Don't wait until you've been in business a year before you start bookkeeping!
If you make transactions online, many sites (such as Paypal and Clickbank) will give you access to transaction logs so you can keep track of your income and expenses. So do it yourself or hire someone else. It doesn't matter which, just do it!
In addition to financial records, you will need to keep track of other information related to your business. Keeping these records on your computer is a convenient way to find the details you need at a moment's notice.
Set up individual files for these areas:
Business connections. Personal details such as name and address, phone, email, company name, and conversation notes can prove to be invaluable later on.
Media connections. Again, keeping personal details such as name and address, phone, email, media type and name, and conversation notes will come in handy for future reference.
Business proposals you have submitted and obtained. All contracts you have accepted! You will find this to be a valuable personal reference, especially if your business takes off and you forget what you promised to whom.All written material (such as ebooks or articles) you have submitted to a buyer and the outcome of those jobs.
Certainly you can think of more items that need to be filed. Consider this just a start.
# posted by Medical Information : 12:19 AM
Subscribe to Posts [Atom]
