How do you account for the costs of using a part of your home for your business? First, you have to figure what percentage of your home is for business use. Let's say it is 10%.

Okay, then 10% of your utilities, basic phone charge, insurance, and mortgage interest are business related. Boy, that was tough, wasn't it? The other 90% are personal. Keep your invoices so your taxman can see what your actual expenses were and always show him how you arrived at the percentage.

I can hear it all now, something else I have to keep a copy? Yes, remember no job is done until the paperwork is finished; and the paperwork isn't finished until you have copies of the documents to prove your income and expenses. Remember that I called it the paper trail. When in doubt, keep a copy.

When you take all of these copies to your taxman, have a heart. Organize them for him. It will benefit you also, because it will take him less time to do your tax return and should cost you less.

To review the paperwork, you need copies of:

1. All income invoices.

2. All depreciable asset purchases.

3. Any notes from banks that you owe.

4. Auto log

5. Home office cost and how you arrived at the percentage

Notice, I didn't say you need all of your receipts for general expenses to give to the taxman, but I would keep them in a box at home. Just in case of that dreaded monster - an IRS audit. Don't just throw them in a box; organize these too. It will make it much easier for you to find something if you have too.

Number 4 - the auto log. You probably wonder where you missed that one. You haven't; we will get around to it pretty soon.

If you have any questions or want a sample Chart of Accounts, give me an email and I'll get back to you.

Jaye
Jaye@strateshooter.com