Sometimes you just need to bite the bullet and talk about that one thing we hate to talk about; Taxes. Today I get to talk with my friend, enrolled agent Jimmy Epley from JD’s Tax and Financial Solutions about being an entrepreneur, making money, taking tax deductions and the best ways of keeping the tax man away.
I always like to know how or when they found that passion to start their own business. For Jimmy, the third time was a charm. With a degree in Computer Science to being a Vegas dealer to starting his own tax business. From not wanting to work for “The Man” to being his own “Man” with a business that solves a problem for other business owners and entrepreneurs.
Here’s some of the nuggets from this podcast:
It’s Just a Hobby
According to the IRS, if you are in it to make money, you are in a business. You may think its a hobby, but if your purpose for that “hobby” is to generate any money, its a business. After it starts making money, then becomes a business, you need to file taxes. A hobby is something you are not doing to make money.
Separate your money from day one. Its best to keep your personal money separate from the business money. If you are a sole proprietor, it’s not necessary, but it’s easier to manage and to focus on if you have one bank account for your personal money and bills and one for the business.
Management by statistics: Look at the numbers. What is your business is doing, what it has done and what it’s going to do. Have more than one stream of income. Do not keep it all in one client, one product or one service.
Independent Contractor or employee? The IRS has 21 factors to determine which one you are. It comes down to control and loss. How much control do you have over the project or job and do you have the chance to make or lose money? The more control you have and the more financial risk you have, the more you are an independent contractor.
The Home Office Deductions are real and often missed! If you use the office at home regularly and exclusively, take the home office deduction. Mileage is another one missed by many entrepreneurs as well as Employees!! If you need to use your car for work, most of those miles or depreciation can be deducted.
Uber and Lyft Drivers, Take Note!! If you need something to run the business and to help you potentially make money, those costs could be deductible. The question is “Are they ordinary and necessary?” If so, deduct! newspapers, business cards, etc….
Use Technology to Document. Using apps to record your mileage, expenses and what they were used for, helps in documenting why you claimed the deductions that you claimed. Also makes record keeping much easier.
Cell Phone Deduction. If you have only one phone, its not deductible. You must have a home or basic phone line for personal use. The second phone line (smartphone) can be deductible! So it may be tax advantageous to get a cheap phone service/line for the home.
Document the Receipt. The 5 things the IRS looks for on a receipt. When, why, where, how much and for what. As always, the more information, the better to prove your case for the deduction if ever questioned.
Documenting Opens Doors. Making money, paying taxes and having the documents opens doors for you and your future. Solves problems, lets you see where your money is going and lets others know you are real and serious. You have less to worry about and can focus more on whats really important; building a better business and more fulfilling life.
Ask Someone Who Has been There. Like almost anything else, its always best to go up. You want to be around people better than you are, so you can excel to their level. You want to take advice from someone who has the experience, not someone who wants to be there!
Take the Risks, Enjoy the Rewards. That’s the best part of being an entrepreneur or owning your own business. Its not always easy or successful, but the rewards are so worth the efforts.
- JD’s Tax and Financial Solutions
- IRS & The Home Office deduction
- Quicken on Amazon
- 2016 Ernst & Young Tax Guide
Image Courtesy of efile.com