Invoices

Basic Bookkeeping to keep the IRS Happy

So you are running your home based business instead of being employed to your usual nine to five job.  Now you are reaping the fruits of your hard work and countless sleepless nights of planning and here comes the biggest question of all: how to keep simple bookkeeping and understanding the IRS? You have to remember that all income earned from working at home is still regarded as a taxable income by the IRS. Here are a few tips to help out with your dilemma.

Keep an accurate record of your income and expenses in order to find out whether or not you will have to pay Self employment tax on whatever you make. Keeping a record for your home based business income is very simple.  Accounting software is by chance the holy grail of bookkeeping but can be pretty expensive. Prices may vary from brand name and manufacturer and developers. Free accounting software is available, but usually with limited functionality. An upgrade will cost you though. Other software , like Quickbooks, offer great business tracking.

Keep a simple log book or an excel spreadsheet will do. Keep all the receipts and invoices for you to have an ease of tracking your cash flow. However, if you are hiring someone to keep records of your income and expenses from your business, those fees are tax deductible. There are many people who offer home based back office accounting work- virtually. This can be your best decision since hiring someone adept to do the job can save you stress, beneficial to both parties and convenient. You need to be very careful on choosing one though since back office accounting, both virtually and just around town can be a pretty fragile subject. Look around for a good deal.

Keep track of everything. From postage, mileages (business trips) training materials expenses, business related seminars and networking opportunities to your staff (regardless of what kind of contract you are both into (hourly, monthly or per project basis) office supplies like Paper, ink, envelopes as well as office equipment and furniture are also tax-deductible business expenses even for  home based businesses .

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