Home Office / Home Based Business Deductions
There are certain fundamentals needed to achieve success in any area of life, from athletics to business. While many elements contribute to success, it is preparation that sets the stage for the rest of the efforts. More often than not, preparation and discipline will win over raw talent alone. Since it is no different for the home business owner, you want to be certain your activities have a sound business basis.
Business vs. Hobby There is nothing wrong with enjoying your business activity. If you can create a business opportunity and earn a profit form a leisure activity you like, then go for it!
The primary differences between a business and a hobby are:
The treatment of expenses. Are deductions limited?
How income and deductions are reported. – income must always be reported.
“Making Tax A Game” focuses on explaining the requirements for creating an environment for profit by providing the IRS’s guidelines in determining profit motive. By checking off the items on this list and by maintaining and retaining adequate documentation, you will be able to provide the IRS with the evidence it needs to properly classify your activity a business. In addition, maintaining adequate documentation will help you minimize the tax consequences of Operating your business and will also provide needed support in the event of an audit.