Business entrepreneurs in Arizona see a lot of friendly tax benefits in the first year of running their business. These benefits are wonderful for promoting small business in America, and they can sometimes make the difference between success and failure during the most formulate months of a business. Some of them can create pitfalls and obstacles that can overburden a business if they are not prepared. The most problematic is the use of a home office.
The most glaring issue for a business owner in the first year is the home office deduction. There are two factors going into the obstacles and weariness of the home office deduction. The first is that it writes off a large amount of income from the business. That makes it quite appealing to many small business owners. The second is that it is a red flag for an audit, and is one of the easiest areas to exploit.
A common mistake is to ignore the home deduction entirely. Business owners are nervous about the implications of the deduction, and they are confused about how to implement it. By definition, the office needs to be used exclusively for business purposes. It may be hard to prove, but what happens in an audit? Is any IRS agent going to truly believe that the office space was used strictly for business?
Furthermore, there are present office supply deductions, Internet, electrical (that accounts for only the home office space) and many other considerations for Scottsdale Small Business Accounting at play.
An Easy Solution
The IRS has developed an easy answer for the many variables involved in a home office deduction. Many small business Bookkeeping Scottsdale professionals have implemented the strategy for clients. They take the square footage of the office space and multiply it by $5. It becomes a $5 write-off per square foot. There are no other stipulations and variables. The consistency is attractive.
Keeping Options Open
The strategy is easy, but is it always the best? The answer is no. It may be less than a traditional method of determining the home office deduction. Scottsdale Business Tax Services can use both strategies to see which one is more effective.
Receive Small Business Accounting Scottsdale to save any set-up a tax return to be IRS-friendly. The mistakes involved with the home deduction is a major area of contention for professionals in their first year or two of business.