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Author: Jake Snelson

There is plenty of time to accomplish that one thing that you promised yourself you’d do this year. Take time today and make a plan.  Follow up on sales calls, take your spouse on more dates, clean out your office, eat healthy, be grateful, increase profits, send an email blast to clients – whatever it is for you, make a decision TODAY and a goal for the end of Q4.  Then get busy making it happen.  EVERY DAY.  That’s what we’re doing over here.

We’ve compiled a list of 8 great quotes to remind you of how important your goals are and encourage you to conquer them one by one. Download the printable version, here.
QuotesToAchieveYourGoals

As small business owners we have to be extra vigilant to protect ourselves.  If you’re accepting credit card payments, please make sure to update your systems immediately.

The responsibility of EMV chip card technology updating is now on the shoulders of small business owners, and they could be the ones facing the consequences if their systems are not up to date.

Stanley Nakano, the Small Business Administration’s Acting Regional Administrator said:

“A major transition is happening in America and small business owners who fail to act may pay a huge price. U.S. credit card companies have set October for the national adoption of chip cards (also known as EMV Cards).  Businesses that have not integrated EMV technology to process chip cards will become financially responsible for fraudulent transactions previously covered by the cardholder’s issuing bank.”

Read the full article here.

If you haven’t taken action to update your systems for the new chip card technology, check out these popular posts:

How does the EMV liability shift affect my business?

What do I need to do to prepare my business for the EMV liability shift?

What is chip card technology and the EMV liability shift?

Ever wonder what financial stuff you need to know to make more money? Ben & Greg break it down in this video to help you make more money at your small business, blog or freelance job.

0:40 Sample P&L (Profit & Loss Statement): What is Cost of Goods Sold? Why is it important to me? These expenses vary with your sales – the bigger your sales, the bigger these costs.

2:23 Visual of Cost of Goods: How much money am I really making in profit? For every dollar I make how much do I spend? How does the Cost of Goods ratio show me what I should focus on improving in my business? Decreasing Cost of Goods Sold will increase my profit. Wahoo!

4:15 The Ultimate Goal in a Graph: Net Profit increasing & Cost of Goods sold decreasing


If you haven’t already heard, merchants will be required to make the change to the new EMV (Europay, Mastercard, and Visa) credit card chip technology beginning October 15th. If you own a small business and accept physical credit cards, you are required to be in compliance with the updated systems. If you accept cards online only, you don’t yet have to make any changes.

Check out the posts below on how this change affects you and what you need to do to prepare for the credit card shift technology.

What is credit card chip technology and the EMV liability shift?

How does the EMV liability shift affect my business?

What do I need to do to prepare for my business for the EMV liability shift date?

 

End of Year Checklist

As December approaches, it’s time to start thinking about your small business bookkeeping and closing out the year for your small business. While that may sound like an overwhelming feat to accomplish in addition to a busy holiday season, we’ve made the accounting part easy with our quick, printable year-end business accounting checklist. Click here to download.

As 2015 comes to a close, you have an opportunity to reflect on the past year with your small business. What worked? What disasters did you encounter/overcome? What was the one thing you knew you should do for your small business but could never find the time? Now is the time to make a plan for an even better business year in 2016 and crush the goals you set for yourself.

In order to conquer the small business world next year, there are a few logistics to take care of first. We’ve put together a quick and easy checklist of things to do and take care of in January so you have 11 full months of small business bliss. Download the printable version, here.

 

kickstart2016

If you own a small business, you undoubtedly work from home, at least on occasion. If you’re like many small business owners in today’s world, you might even work exclusively from home. Whichever category you fall under, claiming a “home office” on your taxes and adding it into your small business bookkeeping can be tricky.

Here’s how to set up and maintain a home office that is in line with IRS standards.

What qualifies as a home office?

What home office expenses are tax deductible?

How do I claim a home office on my taxes?

What if I do business outside of my home office?

Can I claim a bathroom as part of my home office?

Do you have other questions about your home office? We can help! Send us your questions or leave them on our Facebook page and we’ll be sure to answer them as quickly as possible.

If you own a small business, you undoubtedly work from home, at least on occasion. If you’re like many small business owners in today’s world, you might even work exclusively from home. Whichever category you fall under, claiming a “home office” on your taxes can be tricky. Here’s a quick step-by-step guide to make sure you’re in line with IRS standards when it comes to your home office.

Home Office for a Small Business Owner

First, to claim a home office on your taxes, both of these things must apply:

  • You use the part of your home exclusively and regularly for your business. If an auditor were to come to your home, they would be able to easily identify your home office. This means the area can’t double as a play area for children or living room for your family. It should look just like a regular office would.
  • The business part of your home must be one of these to qualify:
    • Your main place of business
    • A place where you meet or deal with clients
    • A separate structure (not attached to your home) that you use for your business

Exclusive Use Explained

Exclusive use means you use the area in your home for business purposes only. The area must meet these requirements to be considered “exclusive”:

  • A room or other separately identifiable space, but it doesn’t necessarily need to be separated by a wall or permanent partition
  • The space cannot be used for business and personal purposes
  • The area cannot contain personal-use furnishings like a TV or a couch, even though these items are common in many businesses

Regular Use Explained

Regular use means you use part of the home on a continuous, ongoing, or recurring basis. You can use the space for more than one business, and you can have more than one business location (other than your home office) for each business as well. However, if you’re deducting a home office on your taxes, your home must be the principal place of business. Factors considered in “regular use” of a home office include:

  • Meeting clients or conversing over phone, Skype, or email
  • Selling or delivering goods or services
  • Administrative activities of your business like billing customers, bookkeeping and accounting tasks, ordering supplies, setting up appointments, contacting customers
  • Updating your website, managing SEO, and other computer-based tasks

If you’re employed by another company and work from home, you can also claim a home office. Here’s how:

  • You must meet the home office requirements above.
  • Factors determining home office eligibility as an employee may also include:
    • The employer requires you to maintain a home office as a condition of employment.
    • Your work for their business isn’t possible without a home office.
    • The employer doesn’t provide a space for you to work outside your home office.
    • You don’t rent any part of your home to your employer and use the rented portion to perform services as an employee.

If you’re already working from home and haven’t set up a home office, now is the time. Home office deductions can save you big money on your taxes and help keep your small business activities more organized.

FAQ – What Home Office Expenses are Tax Deductible?

When it comes to home offices, it’s all about the tax deductions, baby! You could sit on your couch, watch tv, and do your small business bookkeeping and billing...but there’s no tax benefit to that. By creating and maintaining a home office for your small business, you can claim home office deductions that in turn reduce your taxable income at the end of the year. If you have already set up a qualifying home office, start tracking expenses and keeping meticulous records for your income taxes.

Here’s a lengthy, though not comprehensive, list of common home office deductions. Keep in mind these do not include typical business expenses that you would normally deduct whether or not you had a home office.

Tax Deductible Home Office Expenses

  • Paint
  • Carpet
  • Repairs or additions to the structure of the office
  • To learn about the unlikely deduction a bathroom as a portion of your home office, read this post.
  • Office decorations
  • Office furniture including desks, chairs, rugs, lamps, and that fancy painting you just had to have to hang above your desk
  • A separate business phone line (you cannot deduct a landline used for your home phone calls)
  • Other home-related expenses or repairs including snow plowing, roof repair, and trash removal. These types of expenses are deductible, according to the square-footage percentage of your home used as a business.
  • *You cannot deduct expenses for landscaping or lawn care unless you show off your lawn for your business, like if you own a landscaping company.

You can deduct a portion of these expenses, based on the square footage of your home office:

  • Depreciation
  • Rent or mortgage
  • Property Taxes
  • Home insurance
  • Utilities (electricity, heating, water, sewer)
  • Maintenance
  • General repairs

Home office deductions can be tricky. While claiming a home office is not a red flag for the IRS, you want to be careful and not get overzealous when it comes to deductions. The simplified method can make it easier for you to claim the deduction but might not provide you with biggest deduction.

Interested in Learning More?

Schedule a free consultation with our team!

Unfortunately, no. You can’t claim a bathroom as part of your home office, even though you likely take a potty break or two during your work day.

Remember the two most important words when it comes to home offices?

Exclusive and Regular. Even if you mostly use the bathroom closest to your home office while you work, the second you use it as a guest bathroom, for your children, or “off the clock,” it’s not exclusive anymore. In all reality, that’s not happening in most homes. Nine out of 10 times you can’t claim a bathroom as part of your home office.

Take this case study, for example:

“In T.C. Memo. 2011-201, Luis Bulas, Petitioner, v. Commissioner of Internal Revenue, Respondent, Docket No. 18977-09, U.S. Tax Court Judge Haines agreed with the IRS that taxpayer Luis Bulas was not entitled to a deduction for his use of the bathroom as a home office expense.

Bulas, a Florida taxpayer, knows a little something about the tax system. He has a master’s degree in accounting from Florida International University. Even better, he worked for the IRS for seven years as a tax technician, revenue agent, Appeals auditor, and Appeals officer, prior to starting his own tax agency. So, yes, for a long while, he was the guy who helped make decisions about whether a taxpayer was complying with the tax laws (cue music).

Bulas also happens to be a father of two daughters, one in high school and one in college, that helped him out with the business from time to time. This is only relevant because he claimed that he paid wages to his daughters and yet managed not to issue any forms 1099 or forms W-2 to them, a fact that also came up as part of his examination.

But, yawn. That’s kind of run of the mill boring stuff. Let’s get to the potty humor.

Bulas was flush enough (wince, I know, terrible pun) to have a personal residence which included a house, a garage, and a guesthouse. The total amount of space worked out to about 2,677.34 square feet.

Like many professionals, Bulas used one of the rooms in his home – in this case, a spare bedroom – as his office space. The total amount of the space for the bedroom was 226.3 square feet. Bulas eventually put an additional bathroom in his home, ostensibly for his clients’ use.

The IRS issued Bulas a notice of deficiency, denying the deductions for the wages paid to his daughters and the business use of his residence. Bulas, of course, appealed, which is how the case made it to Tax Court.

Bulas claimed that he used one of the bedrooms in his house exclusively for his office. Um, okay. That seems reasonable.

Bulas also argued, however, that he used the hallway – wait, he’s losing me here – and the bathroom exclusively for his accounting business. He went on to testify that his children and personal guests also used the bathroom.

The IRS was willing to grant him the use of the bedroom. The bedroom was, as mentioned earlier, about 226.3 square feet, which worked out to about 8.45% of the total square feet associated with Bulas’ residence. That means that he was entitled to pro-rate his allocable expenses and take 8.45% as a business deduction. No more. Bulas could not offer proof that the personal use of the hallway and bathroom met any exception under section 280A(c) of the Tax Code and thus, the personal use of the space trumped the business use. The result? He lost the deduction.”

Even though a regular office has a bathroom (let’s hope anyway!) you can’t claim one on your home office. There are, however, a plethora of other deductions available when claiming a home office. Capitalize on those and let go of that extra 100 sq ft you thought you might be able to claim this year.