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| 1- |
Keep up with your records--especially if you are
self-employed or have rental income. |
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A cash receipt lost can be a deduction lost. |
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| 2- |
Report all of your income--the first thing an auditor will want to see is your bank statements. |
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They can also find out how much you spend on bills, entertainment, etc.,
and do a "cost-of-living" audit. |
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| 3- |
Keep Mileage Logs--the government will allow you approx. 48.5 cents per mile. |
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Along with business mileage, mileage to go to the post office, bank, and other business locations are
deductible, round-trip from your home or business location. However, an auditor will want to see your log-this can be as simple
as a notebook, calendar (that had large blocks you could write in), etc. You are asked on your tax return if you have written
proof of your mileage. Therefore, make sure you do. If you are not incorporated, taking the mileage deduction almost always
gives you the greater deduction than adding up gas tickets and depreciating your vehicle, even with today’s high gas cost. |
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| 4- |
If you are not incorporated, you can pay your kids/spouse a certain amount per
year for any clean-up, etc., they do for you. |
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You have to keep it reasonable for the children's ages. Don't go overboard. If you pay anyone over
$600.00 per year, you have to furnish them a 1099. If they make over approximately $430.00 per year, they have to pay social
security tax. If you pay your teenage children, they will have to add it to their summer employment income, if any. If you pay
your spouse, he/she will have to claim it as income, but can also deduct mileage on their car for running errands, etc. |
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| 5- |
Lots of folks will tell you to take an "office in the home" deduction. |
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This works if you have a net profit after taking all other deductions. If you have a loss, your
deduction can be limited or carried forward to the following year. You also have to have the area you call your office completely
business-no beds or any other personal use. If you have a net profit after deductions, and have the business-only office, then
you can deduct a percentage of your household bills, as well as a percentage of your house depreciation (something Memphis Tax
Lady will figure). Be warned-this can bite you when you sell your house. You may have to pay taxes on part of the capital gains
if/when you sell. |
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| 6- |
Please, if you own a business or rent property, use a tax professional |
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A self-employed person has a much higher risk of audit than the non-business client, not to
mention the deductions you may lose by simply not knowing about them. Find someone who is easy to talk to, doesn't charge
an “arm and a leg”, and will listen to you. You need to find someone who will investigate and help you take all the
deductions you are legally entitled to, instead of just "saying no".
(Hey, this sounds like Memphis Tax Lady!) |
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