Starting a business can be scary! There are so many tasks that must be completed to ensure your business is operating in compliance with the IRS, your State, your County and your City! And most of the time, many of these tasks must be completed simultaneously, causing confusion and a feeling of being overwhelmed.
Don't doubt yourself when this happens! This is the time that you should realize you cannot wear every single hat and while you can never delegate accountability, you CAN and SHOULD delegate responsibility. Choose trusted advisors that can help you in areas that are not your specialty and rely on them to build your team. This will allow you the time and energy to focus on your own area of expertise - what you do best!
Before you begin any new venture, it is important to review WHY you are doing this and to know your own strengths, weaknesses, opportunities and threats (AKA, SWOT Analysis). This will help you determine the areas you may need some guidance in. And, today is the perfect time (no time like the present!) to figure out exactly what you have done, and what remains to be completed to ensure you are, and remain, in compliance.
You are going to want to keep a mileage log (and may need to recreate one from the beginning of the year if you are not already keeping one). You mus track what is shown below. Some clients like to use Mile IQ which is fine, but keep in mind it needs to be properly set up (with addresses). You cannot just enter St. Cloud to Orlando – Business for the entire log.
Mileage (You must have a written mileage log even if you claim actual receipts):
a. Year, make and model of the vehicle
b. Starting odometer on January 1st (of the tax year)
c. Ending odometer on December 31st (of the same tax year)
d. Total business miles
Also keep in mind that if you are using a personal vehicle for business, you may want to consider obtaining Commercial Vehicle Insurance for liability protection.
Home Office Deduction
To take a home office deduction, you must have a separate and distinct area of your home used solely for business. To track this, there are two options. You can track actual expenses and we then take a percentage at the end of the year OR we can do the “simplified method”.
Actual Receipts Method:
a. Square footage of the home
b. Square footage of the office area
c. If your own your home, we need (total paid for the year): utilities, mortgage interest, property taxes, home owners’ insurance, cleaning, home security, water bill, internet only, landscaping and any improvements made to the home that also affect the office area
d. If you rent your home, the we need the total rent paid for the year and total fees for utilities, home security, cleaning, renters’ insurance, internet only and any improvements to the rental that affect the office area
Or, if you choose to not itemize your expenses on the home office deduction and use the Simplified Method, we simply take $5 per square foot deduction for home office , up to 300 square feet, (a total of $1500 deduction), no questions asked, no expenses needed! Then, there is no depreciation recapture when you sell the property if you own the home.
If any of these guidelines are confusing or you feel you may need more assistance, please call our office. We specialize in helping small and new businesses get started on the right path, save time and money and gain peace of mind! And for existing and larger businesses, sometimes a fresh perspective on your tax situation is all you need to save money for the future! Together, let's plan today for a successful tomorrow!