Online Businesses: How To Save On Taxes
The finances of an online business require just as much attention and care as those for traditional brick and mortar companies. During tax filing season you must rely on your organization and knowledge of your online business’s financial situation to ensure you are reporting income and losses correctly. The following tips will help you accurately handle online business taxes.
Well organized finances make handling the taxes associated with an online business much easier. Income, losses and expenses should be catalogued carefully using a secure backup system online or in hard copies.
Even online businesses can make charitable donations that qualify for itemized deductions. The organization efforts from the previous tip should extend to the receipts from and documentation of any property or cash donated to charity. Without detailed records of each donation, you may not be able to claim the deductions.
Home Office Deduction
If you run your online business from a home office used exclusively for business purposes you most likely qualify for the home office deduction on your income taxes. The IRS has strict qualifications for this deduction so carefully read through the regulations before claiming the deduction
Children as Employees
Consider hiring your children as employees in your online business if they are older than 6 but younger than 18. Wages paid to children under the age of 18 are not taxed and hiring your children into your business presents another deductible expense for your business.
Education and Training
Any expenses you incurred taking seminars, classes or purchasing training materials for your business qualify as deductible costs. The training and educational activities need to be clearly related to your business or the deductions aren’t valid.
Telephone and Internet
The best course of action if you run your online business from home is to have a separate internet and telephone service for the office space. By removing the business communication expenses from those associated with home use, you will simplify the process of claiming the cost as a business expense.
Website Design and Upgrades
Expenses incurred designing or upgrading your online business’s website can be claimed on taxes as business related expenses. This also includes fees paid to professional website designers. There are limitations, so be sure to check the restrictions before filing.
Online business tax filing shares several similarities with offline companies. However, there are unique rules, credits and deductions which apply solely to online businesses. Review these tips and consult a professional prior to filing if you still find yourself confused or unsure.
Teresa works for a company who specializes in problems with unfiled tax returns. Visit her website for more information regarding tax resolution services.