Working At Home
Now that April 15 is past, it’s a good time to look at what you can do for next tax season to reduce the stress involved in preparing taxes for your home business.
According to a survey by American Express Small Business Services, more than 12 percent of small-business owners don’t start preparing their taxes until a week before they are due. Many small-business owners put off their taxes because they fear the paperwork involved.
No matter when you start preparing, the season is bound to be a burden. However, by learning from what went wrong this year you can improve your tax preparation habits and reduce the burden of preparing taxes next year. It’s time to revise your record keeping and tax preparation system now, when its weaknesses are fresh in your mind.
Even if you use an experienced and competent tax preparer, you still have to do your part in pulling together the records and figures needed to complete the forms. Ultimately, the amount of deductions you are able to take may depend on how good your records are. The areas in which you may need to make changes include:
? Keeping track of cash expenditures. In order to document the amount of cash you spend in your business, you must total your expenditures regularly and reimburse yourself by check. For example, if in a two-week period you spend $40 on parking, $15.95 on periodicals and $26.30 on supplies, you would write yourself a check for $82.25. In the memo area of the check, write the time period the reimbursables cover (for example, March 1-15). Also keep a record of what you spent the money on.
? Track travel and entertainment. Although you are not required to keep travel and entertainment slips for expenditures of less than $75, it is a good idea to keep a log of activity in case of an audit.
? Record loans you make to the company. If you have cash-flow problems and loan your business $3,000 while you wait for a client payment to arrive, you may find yourself paying tax on this money if you do not designate it as a loan when you put it in the bank. Deposit these payments separately and keep a file of all loans made to the company. If you keep your books on computer, create a designation on your computer for these loans.
? Spend as little cash as possible. Writing checks or using a credit card for expenditures creates an automatic record of an expense. Avoid using cash and you will find your tallying easier at tax time.
? Track revenue. While you can use 1099 forms to tally your annual revenue, I recommend keeping your own records throughout the year. If you use a computer program to enter all deposits to your account you can easily run a total. This will also ensure that you do not miss any revenue that was reported to the Internal Revenue Service by a client. An oversight like this will often trigger an audit.
Pet project
I recently read about a software engineer with a San Francisco company who brings his bird to work with him every day. Reika, a small lime-green-and-red parrot, and her owner made the cover of Fortune magazine in March because one of the latest job perks at cool companies is allowing employees to bring their pets to work. Home-based entrepreneurs and telecommuters have been doing that for years!
If you’ve been hiding the fact that you have pets in your home office, it’s time to come clean and join the cool crowd. In addition to making you more hip, having a pet in your home office can have many advantages.
Studies have shown that people who have pets live longer because of lower stress levels. If a purring cat or a playful dog can increase longevity, think what it can do for daily tensions. Pets also operate as personal fitness coaches by encouraging their owners to take more frequent breaks, and they can help to reduce feelings of isolation.
There is a downside to pets in the office. Barking dogs are the problem that comes most readily to mind. One of our staff members has a cat that can hang up the phone by jumping on the flash button from his vantage point on top of the monitor.
If you frequently have clients visiting your office, you need to be especially concerned about pets. Not everyone wants to be jumped on by a dog or rubbed against by a cat, particularly if one is wearing a favorite outfit. Also keep in mind that many people are allergic to animals.
If you allow pets in your office and want to maintain a professional image to the outside world, here are some tips that can help you manage the menagerie:
? Establish a cleaning routine: Keep your office scrupulously clean. Vacuum rugs frequently. Wipe the surface of computers and other electronic equipment to reduce hair buildup. An air filter can also help remove pet dander and other allergens.
? Soundproof your office: If your dog has a tendency to bark, make sure your office has a solid door that is relatively soundproof. With the door closed you can carry on a professional conversation without having to shout over the uproar.
? De-scents-itize: Let’s face it, no one enjoys essence of kitty litter or the smell of a damp dog. Be especially sensitive to pet odors. Stock up on odor removers and room deodorizers. A bowl of potpourri by the doorway could help too.
? Debug often: Check your animals for fleas and be sure rugs and upholstery don’t become infested.
? Use the mute button: Learn where the mute button is on your phone and practice using it. When you hit “mute,” you can hear your caller but your caller can’t hear you or the pandemonium in the background. Use this time to whisk your pet out the door.
? Separate when necessary: In spite of your precautions, there will be times when you must banish your pet to other parts of the house. Make these moments pleasant by giving your pet special rewards or treats. Practice in advance so your meeting won’t be interrupted by constant whining or scratches at the door.
Alice Bredin is author of the “Virtual Office Survival Handbook” (John Wiley & Sons) and a nationally syndicated columnist.
