Naturally if you owe money it is not your favorite time of year and if you are owed money you can’t wait to file. You can file any time after January up until April 15. Actually if self-employed you are expected to file quarterly estimated taxes. What you may not realize is you can get around this by paying a small fine each year. Some people would rather have the money on hand for emergencies and don’t mind the fine. Probably best if you can pay quarterly as you always want to save money wherever you can.
You would need to file form 1040 with Schedule A to itemize deductions. You also need to include schedule SE for the special tax they have for self-employed people. Then there is Form 8829 for use of your home for business, with which you can deduct a percentage of expenses such as utilities, rent or mortgage, etc. This all goes with Schedule C, Profit and Loss from Business.
Always consult with the IRS website (irs.gov) to be sure what is required for the tax year, as things change including allowances, requirements, etc. It really pays to have a professional prepare your taxes as they are up on all the rules, and the cost is tax deductible. If you are also employed outside the home you are paying some taxes through deductions on your job and this makes things a lot simpler as far as the schedules above. So again, it really is worth it to consult a professional tax preparer.
It will be a big help if you keep track of your receipts all year just by virtue of having a folder labeled ‘taxes’ – Some things will be online and some will be hard copy as far as expenses you may have for business. Your bank statements and statements from your online payment companies will be a big help and you should print them out for documentation in any case. Be sure that you have documentation for any deductions you take and of course your income. You can be audited for several years and are required to keep financial records for 7-years.
Since you want to figure a percentage of expenses to maintain your home office, it would also be very helpful if you had a spreadsheet where you record your utility bills, rent or mortgage costs, insurance, security, Internet/communications, medical expenses, etc. The thing is however, they give you a large standard deduction and often times you do better just paying your tax based on that. Still, you should have records for all your business transactions and file all the necessary papers for your home-based business.
Some home business models have more items that can be deducted than others – but in any case equipment, (computers, office furniture, etc), office supplies etc., are deductible. Keep in mind if you are paying dues or membership fees for your income opportunities, that these costs may also represent deductions for you along with any expenses you incur advertising or marketing your business.
