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Virtual Assistants need not worry about what to deduct and what not to deduct during their tax prep. Although there are people out there willing to assist you, there are things you can do to get the ball rolling. Depending on how long you've been in business, you might consider doing it all yourself.
If you are organized, or like me, semi-organized, you have a spreadsheet/folders/notebooks with careful notations of the money you made and the money you had to dish out during the year. Even if you some how forgot your debit card or your checkbook during a transaction, I'm sure you had a receipt written out by the client. So pull out that handy brown envelope with all the receipts you've tucked away. You'll definitely need it. Below are a few nuggets in this article to guide you in the event you are scratching your head right now. I know for some, tax time can be difficult. It is my goal to ease the pain a bit. So, here we go.
Capital Expenses
You must capitalize, rather than deduct, some costs such as the business start-up costs, business assets, and improvements. These costs are a part of your investment in your business and are called capital expenses. Capital expenses are considered assets in your business. In general, there are three types of costs you capitalize.
Personal vs. Business Expenses
Divide the total cost between the business and personal parts. You can deduct the business part. For example, if you borrow money and use 70% of it for business and the other 30% for a family vacation, you can only deduct 70% of the interest as a business expense.
Other items to include:
• Business Use of Home (deductions such as rent, utilities, etc.)
• Business Use of Car (mileage, repairs, and maintenance)
• Employees'/Subcontractors Income (W2 or 1099, respectively)
• Business Loan Expenses/Interest Fees
• Entrepreneur Small Biz Owner taxes (see www.irs.gov for the tax calculator)
• Insurance (bond, office equipment insurance)
You can also deduct educational tools or classes, vacations, dining, conferences, seminars, online courses, etc. Running a business requires a lot of work getting it started, maintaining, and tying up loose ends, which includes handling your tax obligations. Make sure you take care of your finances to ensure starting the new year off in the black.
Nikki Ruffin-Smith, CEO and founder of
Exhale to Excel Global Outreach and Empowerment ORG
(www.exhaletoexcel.org)
BUSINESS & FINANCES
A CHECKLIST FOR BEING TAX-READY
BY: Nikki Smith, Guest Contributor Nik