What Kind Of Accounting Records Does The Irs Require For Network Marketing Mlm And Other Stay At H

Two questions frequently asked by Network Marketers are What kind of business records do I have to keep for the IRS?, and Whats kind of record-keeping system should I use in my business?

Operating a business without paying attention to record-keeping is a recipe for disaster. You may be thinking who caresI hate bookkeeping and tax details, and if my business takes in enough money, it wont matter anyway Ill just pay someone else to clean up my record-keeping later!

Not so fast, my friend! A good record-keeping system is crucial for preparing your tax returns. And if you dont prepare your tax returns with care, youll not only pay too much in taxes, but also increase the risk of a dreaded IRS audit. If an auditor finds insufficient records or significant mistakes in your books, it can disallow deductions, plus impose hefty fines and penalties, possibly forcing you out of business and wiping out your life savings as well.

The good news is that the IRS doesnt prescribe one particular system of keeping records that must be used. No two businesses are alike, so theres not one uniform fashion when it comes to record-keeping. Any system is okay, just as long as it paints a true picture of your income and expenses.

You can keep your records either manually, or with a computer.

The manual system works fine for smaller home businesses and cost only $10 to $20 a year for a ledger book and some manila file folders. I recommend a Weekly Bookkeeping booklet, where you can record your income and expenses on a regular basis, and then update the year to date totals, by expense category, at the end of each week. This way you always have an up to date statement of Income and Expenses, or Profit and Loss report, at your fingertips. In addition to the weekly record book, keep a check register, an adding machine, a mileage log,and an accordion file close by for filing receipts. Organize your receipts by category; Advertising, Travel and Entertainment, Cell phone, and so on.

A computerized record-keeping system works on the same principles as the manual system, however, the computer automates the process. You can use spreadsheets to record your residual income and bonus checks, and use separate columns to categorize your expenses.

An even quicker way to categorize your expenses is to use a software program such as Quicken or QuickBooks. These programs work like a checkbook register, with each income and expense transaction typed in as you go. A Profit and Loss report can be printed in a snapassuming you do have some basic accounting knowledge. But beware. A software program is no substitute for a basic understanding of debits and credits. Often the year-end reports that I see produced from accounting software programs is best summarized by the statement Garbage inGarbage Out.

If youre comfortable at the computer and have basic bookkeeping expertise, good for you! But you dont need computer software to keep accurate records. At minimum, categorize your receipts (auto, office supplies, advertising, etc) in manila folders or an accordion file, and total them up by category at tax time. Staple the adding machine tape to each folder or stack of receipts. Either system is okay as long as it paints a true and accurate picture of your income and expenses.

Network Marketing business owners should get a copy of IRS Publication 583, Starting a Business and Keeping Records, for more details on IRS record-keeping requirements.

How To Minimize Small Business Taxes A Tax Professionals Guide

Knowing how to minimize small business taxes means you get to keep Uncle Sams hand from picking your pocket of hard earned money at tax time. If you are not taking advantage of every available, legal, tax loophole, your business profits are being handed over to the IRS.

The following tips will help you reduce small business taxes.

It is recommended to take full advantage of ones claim on Capital Cost Allowance. If you need to buy supplies, machinery, and technology, time it for maximum savings. If doing the math shows you will minimize your tax exposure deducting the expenses this year, do not delay. Using Capital Cost Allowance on your new property, you will still increase the CCA for the current year and will have increased CCA claims for the next year.

Consider postponing disposal of depreciable resources. Do not dispose of business equipment until the following year depending on which will better reduce the tax liability for your business.

Planning income deferments can also help minimize your business tax liability. Postponing or putting off income is recommended if business profit will be higher or if the tax rates in the following tax year are expected to be reduced.
Through smart tax planning managing your expenses to meet higher profits is another strategy for further minimizing tax. Let the tax implications dictate the timing of improvements, supply purchases and equipment upgrades.

Make the most of Registered Retirement Savings Plan (RRSP) payments possible as a means of minimizing small business taxes. Contribution of up to eighteen percent in any given year of the profit, along with a Registered Retirement Savings Plan (RRSP) payment is deducted from the income. An RRSP is advantageous to be considered for tax deduction for small businesses. Additional deductions you may or may not be taking full advantage of include write-offs for start-up expenses; office costs; furnishings; advancement through education; travel expense; insurance premiums; affiliations; and conferences.

Employ members of the family. The government is particularly understanding to family-run businesses when salaries are concerned. You are not required to provide payment for federal unemployment taxes if you employ in your business your husband or wife or parents. There is no need to hold back income taxes and Social Security if siblings work in your business. However, child labour laws are still applied even if they are your children so age restrictions must be considered. As employees they must receive proper salaries and must be assured that the company is benefited in order to be eligible for these exemptions that can help dramatically reduce small business tax exposure.

Employ independent contractors so you will not have to withhold state income taxes from their salaries. As the business owner, you will not have to provide withholding payment for the employers contribution for Social Security as well as Medicare taxes. There is also no need to provide unemployment benefits for independent contractors. However, make certain that the IRS does classify the independent contractor as your employee. If they do, you will be requested to provide payment for taxes including fines levied for any missed withholdings you may or may not have been aware of. Consult your tax expert before categorizing an individual as an independent contractor to be sure you are properly doing so.

Contributing to charity can help reduce small business taxes. Donating to non-profit groups that work to help others who need assistance is a great way to reduce tax liability. In this way, you will be able to decrease the tax exposure of your business. Tax incentives are offered by the IRS for businesses and individuals who give contributions, so why not take advantage of these opportunities that are mutually beneficial by creating a tax plan of donation to your favorite charities.

Prior to making a contribution, be sure the charitable organization qualifies for the deduction you seek. The IRS also requires you to document with the organization donations of $250 or more.

No one is exempt from paying taxes; however, executing a proactive, smart business plan to reduce the business tax exposure for your business is good business. Small deductions when added up, combined with a tax aware financial plan created with an experienced accountant can help not only to minimize your business taxes but grow the future you are working so hard to create.

How To Get A Bigger Business Tax Refund

Business tax refund tips can help prevent you from overpaying taxes and increase the size of your refund check. The sad fact is most businesses overpay their tax liability each year. Overpayments can occur because deductions were not maximized, tax withholdings were incorrect or due to the change of tax laws.

Sometimes your refund can be the result of simply paying more cash than was needed to balance your accounts with the IRS.

It is imperative to go through your business tax plan to have a look at what you can do to reduce the income taxes you are required to pay, legally, and ethically. The following business tax refund tips will help you determine what deduction areas might need further focus with your accountant.

Claiming a home office deduction no longer entails a greater possibility to be audited, when done right, so you can utilize this deduction and still minimize the possibility of an Internal Revenue Service audit. The space you write off must be intended and used for business of course and to determine how much of the area in the home is used as a home-office and become requires the following computation. Measure the work space. Divide it by the number of square feet of the home. The percentage will be your business use percent of the home intended for business. This provides the percentage of business expenses from home expenditures such as rent or lease, mortgage, insurance, utilities, that can be safely claimed as a deduction thereby increasing your refund if you are not currently writing these expenses off.

When a business operator does not claim a home office deduction you can deduct the business or office supplies being purchased. Keep the receipts from these purchases so they can offset the business returns that will be taxed. Missed dedcuctions are the key to increasing your tax refund by reducing your expected taxable income.

Another business tax deduction underutilized is to write off the furniture used in your office. You can deduct 100% of the amount spent on furniture in the same year of purchase. You can also opt instead to claim the value depreciation over 7 years if this will net you a great refund. Run the numbers in order to decide. An IRS chart is available to keep track of depreciation from year to year. Additional supplies like fax machines, computers, photocopy machines, and computer scanners are also deductible and will help maximize your office deductions.

Keep records of expenditures with dates, mileage, toll fees, parking expenses, gas expenses, and the purpose of the travel as the IRS offers tax deductions for such business expenses. You can also add up your business expenses and deduct these costs against personal auto expenses like gas, maintenance and repairs, as well as insurance payments. If your vehicle is being leased, payments for this are also possible deductions to maximize your return. You can surprise yourself with a large tax refund simply by taking full advantage of the tax code.

For small-scale business travellers, the travel expenses and hotel accommodations inclusive of dry cleaning services, car rental services, and tips are deductible. For meals consumed while travelling, only 50% percent are deductible. However, business meals back home with clients are 100% deductible. Entertainment expenses with clients are 50 % deductible while gifts for clients and employees are totally deductible up to twenty-five dollars per person within a year.

Expenses incurred paying for personal health insurance premiums are deductible. Nevertheless, the deduction cannot be beyond the net profit the business makes and is not permissible if the person is qualified for some other health insurance coverage which also takes account of the medical insurance of a spouse who is employed. If the spouse works for the business owner, his or her medical premiums are totally tax deductible. This may include you and the children being dependents on his or her medical plan.

Improving your business tax refund can be done through planning your taxes to use retirement savings that are tax deductible.

Being self-employed and operating a personal business, a business owner is required to provide twice the amount an employee contributes for social security. However, 50% of the payments are deductible.

Business call expenses made from the house not including regular fees and charges if kept in record are also deductible, returning hard earned money back to you at the end of tax season. At years end, the phone usage cost amounts may be summed up and deducted.

Bigger refunds through tax organization. Salaries provided to kids below eighteen years old who work part time for you as a business owner or part of a partnership with your spouse can be deducted. This does not apply if the business is run as a corporation. Your tax organization strategy will help determine if this deduction is worthwhile to pursue.

Getting a bigger tax refund come IRS accounting day is a matter of taking advantage of the opportunities in that were created in the tax code to help you keep your hard earned money.

Payroll deductions, withholdings and deductions working in harmony for your business translates into ethical, legal savings on your taxes each and every year that you can bank on.