Determine whether home work is economically feasible for you. Will you earn enough money at home to meet your needs? Home work does not offer fringe benefits, paid holidays, or overtime. However, the savings accrued by eliminating commuting costs, full-time child care, and wardrobe may offset these losses.
Check with an accountant for information on tax liabilities and deductions before beginning any home-based work. CPA Dolly DiPesa, a partner at Charles DiPesa and Company in Boston, Massachusetts, explains, "Income from work done at home is reported on a 1040 form as personal income for income tax purposes."
Segregate a work area just for you. If telephoning is involved, get a separate telephone for business. A portion of your total household expenses is deductible as a business expense if you have an office in the home. If you are starting your own business you will need a business certificate available from your city for a nominal fee. If you are selling a product, you must register with the state so that you can collect sales tax.
Keep records. DiPesa also stresses that record keeping is very important. "Keep your systems in order. Keep ledgers for cash receipts, disbursements, and accounts receivable." In addition to the deductions for your mortgage payment or rent, electric, heat, and insurance bills and any other business-related expenses are also deductible.
To Incorporate or Not? For certain types of home-based businesses a lawyer's input would be valuable. Decisions such as whether to incorporate or be a sole proprietor should be made following a legal consultation.
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