Author: Collin Almeida
Source: free-articles

Maximize Your Tax Deductions Using The IRS’s “Two Business Location Rule”

by Collin Almeida

If you’re like most Americans, your automobile is one of your biggest expenses. Gas, insurance, maintenance, and licensing all add up to a generous portion of the average person’s income, not to mention the actual cost of buying or leasing a vehicle. Wouldn’t it be wonderful if you could write-off a considerable amount of these expenses on your taxes? Well, if you own a home-based business, you can. All it requires is some simple documentation and you can start claiming thousands of dollars in automobile-related tax deductions.

How many times have you gone to pick up office supplies while you were out buying groceries? When was the last time you ran to the bank to make a quick business deposit on the way to picking up your children at school? Chances are you do these things all the time, but you probably never realized that those miles could be claimed on your taxes. As far as the IRS is concerned, you can claim the miles as a business expenses if the primary purpose for your trip was company-related. Think of the plethora of possibilities: making copies at the mall while Christmas shopping, buying stamps on your way to pick up dinner, or comparing prices on computers while you shop for a new DVD player. All of these trips and plenty more could be legally claimed as tax deductions.

In addition to errands, you can also claim the miles you rack up while commuting to and from a regular job. If you have a home-based business, your commute mileage can be deducted under the IRS’s “Two Business Locations Rule.” According to this rule, you can claim mileage accumulated driving – “from one business location to a second business location”. Here’s how it works:

Before going to your regular job, handle a business- related task for your home-based company, such as phoning a client, checking e-mail, or balancing the books.

On your way to your regular job, make a “necessary business stop.” For example, you might run by the bank, the copy center, or the post office.

Drive to your regular job.

Reverse the procedure at the end of the day.

As long as you follow all four steps daily, you can claim all those commuter miles.

While there’s no trick involved in claiming these deductions, it does require additional effort on your part. First, you must rearrange your schedule in order to incorporate the business stops. While this may seem annoying at first, most home-based business owners find that the reorganization boosts their overall efficiency. For example, instead of running a dozen separate errands during a week, those can be combined into only a few, slightly longer trips, which will save you time, energy, and probably gas.

Of course there’s the second part: the record keeping. In order to audit-proof these deductions, you will need to keep a vehicle-use log. The log can be a simple notebook with columns for destination, trip’s purpose, and odometer reading. You must complete the log for every car trip you make, not just the business-related ones. It may seem like a lot of effort, but each entry would take less than a minute to record and after a week filling in the columns would become as much a habit as fastening your seatbelt.

You’re probably wondering if the deduction is actually worth the inconvenience of rearranging your schedule and keeping a log of all your car trips. Decide for yourself. If your round-trip daily commute is only 10 miles, you can earn a deduction of $3.45 every working day, almost $20 a week, over $1000 for an entire year and that amount does not include mileage for business-related errands. Basically not taking the time and effort to claim this deduction is like throwing $10 out of your car window every 30 miles!

Besides writing off your car’s accumulated mileage at tax time, you can also claim other automobile-related expenses. For example, you can claim gasoline, insurance, parking fees, and tollbooth expenses as additional deductions. Just keep all receipts and documentation in order to protect yourself in case of an audit.

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Discover little known but highly lucrative tax advantages you can legally claim as a home based business owner by visiting http://www.homebusinesstaxsecrets.com Get the FREE REPORT: “5 Hidden Tax Dangers…” that shows you how to save $1000′s in taxes and avoid costly audits.

Discover little known but highly lucrative tax advantages you can legally claim as a home based business owner by visiting http://www.homebusinesstaxsecrets.com Get the FREE REPORT: “5 Hidden Tax Dangers…” that shows you how to save $1000′s in taxes and avoid costly audits.

Author: Jim Christian -
Source: articleage.com

The home office is fairly commonplace these days as more people choose to work from home, either telecommuting or starting their own businesses.

Several things need to be considered when setting up a home office, not the least being how to insure it. If you are working at home under a telecommuting arrangement with your employer, the risk will be borne either wholly or partially by them. You will need to clarify exactly who is responsible for what before entering into the arrangement.

If starting a business from home, you are responsible for ensuring that the insurance coverage is adequate. Some different types of insurance for the home-based business operator to consider are:

? Office equipment

? Inventory (if stock kept on the premises):

? Public Liability

? Professional Indemnity

? Workers’ Compensation

? Personal Accident/Income Protection

Many small or “micro” business operators may feel they need little, if any, additional insurance. Picture this?

Your home is struck by lightning during a major storm and all of your electrical equipment is “fried”. Your Home Contents Policy will cover replacement of household electrical appliances destroyed as a result of the lightning strike but does not cover equipment used in the operation of a business. Some companies do offer limited cover for home office equipment?yours doesn’t.

Do you ever consult with clients at your home office? If a client trips on one of your children’s toys and is injured, don’t expect to be indemnified by the public liability section of your household policy. Any liability arising out of your business activities will be borne by you.

Think about this for a minute. Medical expenses, loss of income due to incapacity, not to mention legal expenses if the matter goes to court plus any judgement that may be awarded. Without Public Liability insurance for your business, one claim is all it would take to ruin you financially.

If you keep inventory on the premises, remember that it is not covered under your household policy. A separate policy to insure your stock will be required.

Perhaps you don’t handle stock. Your product may be your expertise and talent such as a business consultant or financial advisor. What if your advice is proven to be wrong? A financial advisor whose clients lose a lot of money because of his advice may well sue him for that loss. Without Professional Indemnity insurance, another small business folds.

Another question to ask yourself is this: What effect would losing my home-based business income have on my current lifestyle? If the answer is anywhere from “hardly any” to “catastrophic”, some form of Income Protection or Personal Accident insurance is recommended.

Then there’s Workers’ Compensation. “Workers’ Compensation?” I hear you incredulously ask. “But I don’t employ anyone!”

Consider this ?

You’re a graphic designer and very, very busy. Demand for your services has grown so much that you occasionally subcontract out some of the work.

On one particular occasion, you contact another designer with whom you’ve worked before. He meets you at your favourite coffee “haunt” and you go over the job specifications with him. The meeting ends well and you look forward to receiving his part of the project in due time. He can’t wait to get started (or to receive your cheque).

On the way home from his meeting with you, the other designer is involved in a car accident and seriously injured. He will be unable to work for at least eight weeks and has no Personal Accident insurance.

His was the only vehicle involved so there’s no recourse there either. His only alternative to keep life in some kind of order is to claim Workers’ Compensation?from you. Since the accident occurred on his way home from his meeting with you – someone who has offered payment for a service provided – it would be difficult to successfully dispute his claim.

Regardless of what type of business is being operated from your home, it is imperative that the correct insurance type and level of cover is obtained. As is illustrated by the examples given, it only takes one incident, giving rise to one claim that can ruin, not only a business, but also lives.

And it is not just the business operators who suffer. The injured parties who are themselves unable to earn a living, through no fault of their own, also suffer – as do their families. Even if a judgement is awarded in favour of an injured party, the now bankrupt home-based business operator involved would have no means by which to pay it.

Bottom line? Talk to an insurance broker today!