Men and women in the construction trade are generally not trained in the art of running a business or keeping records to the satisfaction of the IRS. But it is not difficult, once you know how, and it can be done in 30 minutes a month. These ten tax tips will get you started.
Tax council n. # 1: The IRS requires you to document your business income.
Open a bank account for your business and deposit all business income, both cash and checks, into that account. The advantage here is that you will never need to earn full income again; the bank provides that figure each month as Total Deposits.
Fiscal council n. # 2 – You’ll pay less tax if you keep receipts for every business expense incurred.
For the self-employed, tracking expenses from receipts is faster than any other method. If you don’t receive a receipt, make one and total all expense receipts on a monthly basis. Pay all expenses from your business bank account or from a credit card reserved exclusively for your business. If you pay in cash, write it down on your receipt.
Tax council n. 3: You won’t pass a tax audit if you don’t keep proper mileage records.
For every two miles you drive within your business, you can deduct more than $ 1 from your taxable income. But, if you do not keep a mileage log, this deduction will not be allowed. Keeping your log in the car will make it easier to track mileage; even a 2 mile trip is noteworthy.
Tax Tip # 4: All the tools you need for your business are deductible.
Every hammer, nail, brush, or other tool necessary for your business is a deductible expense. Tracking these expenses can lower your tax bill and ensure you have the tools you need to earn the best price.
Tax council n. 5 – If your garage now stores your tools and equipment, rather than the family car and bikes, you may be able to deduct it as a home office expense.
It is not just an office that can be deducted in the category of home office expenses; You can also deduct storage space used exclusively for business.
Tax council n. # 6: All barter income must be reported.
Example: A roofer changes his job to a builder who installs his new kitchen cabinets. Both must report this trade as income; the reported value is what they would have charged for those services.
Tax Tip # 7: Items purchased to complete a job can be deducted immediately; Items purchased for inventory are deducted as sold.
Example: If a carpenter buys lumber for a job, he can deduct it in the year of purchase, but if he buys lumber to build toy boxes to take to the local flea market, he may have inventory costs. The cost involved in taking the inventory must be carried over to the following year and is not deducted until those boxes are used up.
Fiscal council n. 8 – No matter how good your tax professional is, if you don’t provide all the necessary information and figures, your tax return will be incorrect.
It is up to you to total your income, expenses, mileage, and other costs. Come with a detailed list of expenses and a list of questions. A good tax preparer will answer your questions and help you learn more about keeping records for the IRS.
Tax council n. # 9 – Without receipts, you won’t pass an IRS audit.
Store your tax receipts in a box or bag and keep those records for a minimum of 3 years from filing; Tax returns must be kept for a minimum of 10 years.
Fiscal council n. # 10 – Record keeping doesn’t have to be complicated or involve computer software; a simple method is best for those who have no accounting background.
Using monthly bank statements for total income and actual receipts for total expenses is quick; Using this method, most freelancers can do their monthly accounting in 30 minutes or less.