In the current economic environment, many smaller firms are looking for ways to cut costs. One such possible move would be to relocate from a rented office space to a home office. With today’s modern means of communications and virtual marketplace, this may be a good option for your business.

The advantages include the ability for you to deduct from your business income some home expenses, such as utilities and certain maintenance costs that are not otherwise deductible. Those expenses will include a depreciation allowance for the part of your home that is the office. A portion of your mortgage interest and real property taxes will be deducted on your business schedule rather than as itemized deductions. You will be eliminating the costs of your non-deductible commuting travel, while business travel will now generally be measured from your front door.

There are two significant downsides to a home office. First, to the extent of the depreciation taken on the home, gain when you sell it cannot be excluded under the home sale rules. Secondly, if the home office is in a separate structure, then the separate business portion does not qualify for the home gain exclusion. You should also note that the home office deduction is limited in any year that your business operates at a loss.

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Food and lodging expenses may be deducted when you are away from home for business purposes. Like everything in the tax law, to be tax deductible there are certain rules to follow and the individuals that know the rules and keep good records get the most out of these deductions.

The IRS requires that lodging expenses (and other expenses of $75 or more) be substantiated by records or other evidence. Acceptable records include diaries, logs, receipts, paid bills and expense reports. The records should disclose the amount, date, place and essential character of the expense. The following are some tips to help you stay on top of the required documentation: (more…)

Many students hold a summer job during their time off from school.  Here are some tax issues that should be considered when working a summer job.

Completing Form W-4 When Starting a New Job – This form is used by employers to determine the amount of tax that will be withheld from your paycheck.  Taxpayers with multiple summer jobs will want to make sure that all of their employers are withholding an adequate amount of taxes to cover their total income tax liability.  Generally, a student who is claimed as a dependent of another with income only from summer and part-time employment can earn as much as $5,800 (the standard deduction amount) without being liable for income tax.  However, if the student has other investment income, the tax determination becomes more complicated.  This is because he or she is a dependent of another and subject to special rules.  (more…)

If you, like many others during the summer months, have gotten married or plan to get married in the near future, here are some post-marriage tips to help you avoid stress at tax time.

1. Notify the Social Security Administration – Report any name change to the Social Security Administration so that your name and SSN will match when filing your next tax return.  Informing the SSA of a name change is quite simple.  File a Form SS-5, Application for a Social Security card at your local SSA office.  The form is available on SSA’s Web site, by calling 800-772-1213, or at local offices. 
2. Notify the IRS – If you have a new address, you should notify the IRS by sending Form 8822, Change of Address.  (more…)

The Internal Revenue Code (Sec 41) provides a tax credit of up to 20% of qualified expenditures for businesses that develop, design or improve products, processes, techniques, formulas or software and similar activities.  The credit has been available off and on since 1981 and has never been made permanent by Congress.  It has been extended several times and is currently scheduled to expire at the end of 2011.

The credit is calculated on the basis of increases in research activities and expenditures.  Its purpose is to reward businesses that pursue innovation by continually increasing investment.  Even so, an alternative simplified method allows taxpayers to claim research credits if research costs remain the same or even decline when compared with prior years. (more…)