More Tax Season Tips for Work at Home Professionals

In Monday’s post I talked about tax season for working at home parents, which can be daunting to say the least. It’s often difficult to know what can be deducted and what can’t, so much so that Mark Steber, Chief Tax Officer with Jackson Hewitt Tax Service, a provider of full service individual federal and state income tax preparation, says that, “Self employed and small businesses have many tax considerations, including special rules, unique deductions and tax benefits and many other considerations. No matter how small or how independently employed, these taxpayers would be well served to consult a professional preparer in today’s complex tax environment to be sure they get every tax benefit they deserve.”

For instance, in 2010, Steber says, there were several new tax benefits added to the tax laws. These allow for even greater tax deductions and breaks, including the 2010 Small Business Job Tax Relief Act. Before doing your taxes, ask about these new laws to ensure you are taking advantage of their benefits.

Additional items work at home business owners should consider during this tax season include:

Steber notes that if you and your spouse operate a business together and file a joint return, you may be able to be treated as a sole proprietor instead of a partnership. You would do this by reporting your share of income and expenses as a self-employed individual on the appropriate form. Unsure if you can deduct the business use of your home? Ask these questions, Steber says: Is this part of the home used only for your job? Do you meet clients here? Is this your primary place of business? Do you store samples here or administer and manage your trade from this location? If you answer yes to any of these questions you might be able to deduct certain depreciation and operating expenses for the business. In some instances you might be able to recover investment in certain business-related properties, such as equipment, a vehicle, or building, through depreciation. “In this manner, you deduct some of the cost of the property on each year’s return,” Steber says. “If you do not claim the depreciation, and you later sell the property, the IRS will calculate the basis as though you had taken the deduction each year.” Finally, Steber says, don’t forget that your employees’ wages and salaries are deductible if they’re paid for work related to your business and the pay is reasonable considering the type of work. “You must be able to verify that the payments were made for duties actually performed,” says Steber. “There are various types of withholding for different types of employees. Specific forms must be used for reporting payments made to employees.”

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