Business Start-ups

Taxpayers are entitled to deduct any expenses for using their homes for business purposes if the expenses are attributable to a portion of the home or separate structure used Exclusively and On A Regular Basis as the principal place of any business carried on by the taxpayer (occasional use is not sufficient) or a place of business that is used by clients, customers, patients, in meeting or dealing with the taxpayer in the normal course of business. If the taxpayer is an employee, the business use of the home must also be for the convenience of the employer. A home office deduction may be claimed if the taxpayer regularly and exclusively uses part of the home for conducting the administrative or management activities of the business. Home office expenses may include real estate taxes, mortgage interest and operating expenses such as insurance and utilities and also depreciation. Home office deductions may be limited. The allowed deduction is calculated and reported on IRS Form 8829 and then transferred to the taxpayers Schedule C. There are certain tax consequences of claiming a office in the home deduction. A consequence occurs when the taxpayer sells his residence. Current law allows a $500,000 exclusion on the sale of a residence ($250,000 for non joint returns). If a residence is sold with a home office, the gross sales price must be apportioned over the residence and the business office. A taxable gain on the sale may occur. If a residence is sold without a home office the full exclusion may be taken. Some CPA's suggest not claiming a office in your home for the two years prior to the sale of the residence. Speak to your local CPA about your specific circumstances to work out a strategy that works for you.

Goodwill is the difference between the selling price and the estimated assigned values assigned to all the assets not including the goodwill. The seller's asking price will be broken down into its various components such as equipment, inventory, furniture, accounts receivable, miscellaneous assets, assumed liabilities and the difference will equal the goodwill.

Cash accounting is never mandated by the IRS. In other words, there is no tax-related scenario that forces you to adopt cash accounting Accrual accounting is the system you must use if: 1.You have more than $10 million in annual gross receipts. 2.Your gross annual receipts are less than $10 million but over $1 million and your primary business activity can be classified as wholesale, retail, publishing, sound recording or mining. 3.You are a partnership or tax shelter. 4.You are a farming corporation that meets certain IRS rules listed in Publication 225.

Some aspects to consider are licenses required, zoning laws and other regulations that vary from state to state and business to business. Depending on the type of business you are running, you may also need establishment linenses, liquor licenses, delivery and or transport licenses. Your local SBA office or chamber of commerce will provide you with general information. You must decide about your form of organization. You must choose to be a sole proprietorship, corporation s corporation or partnership. Speak to your local CPA for advice specific to your business and location.

You should initially apply online. Go to www.irs.gov/businesses and click on employer ID numbers. Your local IRS service center can also assist you in getting a Federal ein. The phone number is 1-800-829-4933:.

You can file online Form SS-4. Go to www.irs.gov/businesses and click on Employer ID number. Your local IRS Service Center can also assist you in getting a Federal EIN. Call IRS at 1 800-829-4933.

The best source document to use is a calendar diary. Enter the odometer readings at the beginning and at the end of each trip. Enter any actual auto expenses incurred on the trip. At the end of the year you may be able to optimize between the higher of the actual or mileage rate expenses. Enter the names of company or the people you met with. Enter the business purpose of the trip. Enter any meal or entertainment and other miscellaneous expenses incurred in addition to using your car.

The address is www.irs.gov

If you’ve made the determination that the person you’re paying is an independent contractor, the first step is to have the contractor complete Form W-9 (PDF), Request for Taxpayer Identification Number and Certification. This form can be used to request the correct name and Taxpayer Identification Number, or TIN, of the worker. A TIN may be either a Social Security Number (SSN), or an Employer Identification Number (EIN). The W-9 (PDF) should be kept in your files for four years for future reference in case of any questions from the worker or the IRS. A penalty can be levied against you, the employer for omission of this information on certain forms.