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______________________________________________________________ --- Welcome To --- H o me B i z B y t e s Visit us on the Web at:http://www.HomeBusinessOnline.com ..... February 1, 2000 * See end for contact, submission and subscriber information. _____IN THIS ISSUE_______________________
- EDITOR'S RAMBLINGS - FEATURED ARTICLE - COLOSSALLY COOL CLASSIFIEDS - TIP OF THE DAY - DOWNLOAD OF THE DAY - ONLINE RESOURCES OF THE DAY - SITES OF THE DAY - KIND THINGS YOU HAVE SAID... Thanks! - Contact, Submission and Subscriber Info _____LOOK!_______________________________ Please give our sponsors a click. Free Targeted Advertising Join the Link-Box Link exchange and get your ad in front of thousands of people, absolutely free! Link-box is the first and only link exchange service that let's you trade text ads instead of unsightly banners. Join today and get 1000 free credits just for giving us a try.
_________________________________________ Welcome to our 124 new subscribers since last week's issue. This issue begins a short series of articles on taxes. Thanks for all the tips received from readers for this series. We've got some good information to share, perhaps things you haven't yet heard. The new BizOpBytes newsletter begins this week and will contain information on specific home-based industries, as well as straight-forward information on finding and selecting a home-based business. Subscribe by sending a blank email to bob_sub@HomeBusinessOnline.com?subject=Subscribe_BOB For information on advertising in the new BizOpBytes ezine, send a blank email to BOB_ads@HomeBusinessOnline.com?subject=BOB_Ad_SpecialsRAMBLINGS... Now, a big question is, how did they get your email address if you did not provide it? Was it read from your computer? A cookie from some company? Give me your thoughts... and don't forget to tell me about yourself. I read every email. Heidi Perry P.S... As promised we've put up some new polls: 1) How many home-based businesses do you currently have? Your voice is needed...quick and fun at _________________________________________ So off to my home office I go Tax reduction is not for the timid. So, do you dare read this article? With over 40,000 pages of "Tax Code," accountants simply can't keep up with it. Like it or not, we need to look out for ourselves. How? Knowledge. Let me offer a little perspective. A survey by the Tax Foundation estimated that americans would "spend more per capita in 1999 on taxes ($10,298) than on food ($2,693), clothing ($1,404), and shelter ($5,833) combined." Taxes eat up 38.2% of the average family's income; that's more than for food, clothing and shelter combined. (Source: Tax Reduction News) If your reaction to this is, "Boy, this is frustrating, but there's nothing I can do about it," then there really is no reason for you to finish reading this article. However, if you feel there must be a legal way to reduce your taxes, and if you'd like your home-based business to help you, you'll be interested in what's to follow. I know, you want to reduce your taxes, but the thought of spending time reading about income taxes rates right up there with having a root canal. Better to just hand everything over to an accountant and let him/her handle it all. Right? No way! I'm not saying don't hire an accountant. I, myself, use and accountant. What I am saying is that YOU need to take charge of your own taxes. I can't count the number of times I've heard people complain about how their accountant actually cost them some money. Or, how about the ever-present complaint of the accountant him/herself? "I wish I had known about [such and such], I could have saved you a lot of money." The plain and simple truth is, one of the biggest hurdles you'll face in running your own business is to stay on top of taxes you have to pay now that you're self-employed. Okay, have I scared you off yet? No? Great, then I've got some great news for you. Having a home business is one of the very best ways you can reduce your taxes. It's true! You just need to know how. We're going to get in depth in only the main areas that you need to know right away. Then, in other articles we'll cover some of the specifics. First, I want you to take a good look at your business. Are you floundering all over the place? Do you have a good accounting system? Is the income you're making just here and there but not really doing anything? If your answer is yes, then you might be in danger of being termed a "hobby" and not a "trade or business." What does this mean? Well, the IRS doesn't let you take certain deductions if they term you a hobby. A hobby may be defined as an activity engaged in purely for self-satisfaction. On the other hand, a "trade or business" is an activity that is carried on for a livelihood or for profit. According to the IRS, to constitute a trade or business, a "profit motive" must be present. Remember that term, profit motive, it will come up in later articles. Profit motive doesn't mean you can't have a loss for the year, rather, it means you are aiming to achieve a real economic profit, not just a tax savings. The IRS doesn't look kindly to this. Either you must prove that you have a profit motive, or you can use these nine factors the IRS uses to determine whether you are a hobby or a business: 1) How the Business is Run - Is the activity carried on in a business-like manner? Accurate record keeping? New strategies to increase profits? 2) Expertise - Does the owner have the necessary expertise to run the business? If not, does he/she seek out and follow expert advice? 3) Time and Effort - Does the owner expend the effort needed for the business to succeed? 4) Appreciation - Is it likely that the business will appreciate in value over time? Will the eventual sale or income eventually result in overall profit? 5) Success In Other Activities - Has the owner managed to convert other activities in the past into profitable enterprises? 6) History of Income or Loss - Did the losses occur because the business was still in a startup phase? Unforseen circumstances? If the owner continues the activity for many years, despite continuing losses, and without a clear profit motive, it may indicate the activity is a hobby. 7) Amounts of Occasional Profits - Are occasional profits significant in comparison to the size of the owner's investment? An occasional small profit for an activity generating large losses, or in which the owner has a large investment, may not establish a profit motive. 8) Financial Status of Owner - Is the business activity the only source of the owner's income? 9) Personal Pleasure or Recreation - Is the business' activity typically one of recreation? Or is it generally not considered to have the elements of personal pleasure or recreation? Phew! Now, after asking yourself these questions, you may need to do a little planning in advance, i.e. trying to minimize your deductions and maximize your income in at least the first three "profit years." Then, maximize deductions and minimize income in the remaining two "loss years." If it appears the business will not be profitable for some years, you'll most likely have to rely on the nine factors above to establish a profit motive. For some of you, establishing a profit motive is not an issue, but for others, you will need to take a really good look at your "business" and possibly make some changes. Either way, if you enjoy what you do, a home-based business can bring some wonderful tax deductions your way. Evaluate where you are. In the next issue, we'll talk about selecting the right legal business form for your business and what tax implications each may have on your business. 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