Maybe a better title is No business plan means your tax benefits may be taken away from you during an audit. No matter how you slice it, any home business without a good business plan can and has been considered a “hobby” by the IRS.
There are even cases where this has gone to court and the judge has sided with the IRS that their home business was just a hobby and did not qualify for any tax benefits.
This means that if you have been good about taking full advantage of all the tax benefits afforded to home business owners without the proper documentation, you are sitting on a fiscal time bomb.
You could play the odds and “hope” that the IRS does not chose you for their next audit, but why would you do that when you could protect yourself and help your business at the same time?
Putting the what, why and how of your home business on paper helps in so many ways. There is no better way to ensure that you know your path to success than writing it down. Rarely does anyone build a strong business without some sort of plan. Something more concrete than “talk to anyone I meet”.
The sad part is that, despite the multitude of articles on the Internet about the importance of making a plan and goals, many home business owners just “wing it” with little or no guidance from others in their field or team.
Little do they know how much they are missing and how much their business is hurting from the lack of a cogent plan.
So, you don’t have a business plan?
There are numerous free and for-fee resources on and off line to help you write a business plan. Do a simple search and you will find some decent resources to help you get started.
We give each member of our team a template for them to use when building their individual business plan. If you are part of a Network Marketing business, ask your upline for help.
- Scan your receipts – many store receipts are printed on thermal paper and fade over time. Imagine the horror of sitting in front of the IRS auditor with a bag full of blank receipts.
- Don’t just keep a receipt – write down the activity and remember to include the miles driven
- Document all of your activities spent on your home business – Yeah, this sounds like a pain but trust me, this will help you in more ways than you know. Keeping a log of your daily activity not only helps show how serious you are about your business it also helps you see where you are truly spending your time. If your business is not making any money, a daily log will quickly show you why.
- Take pictures of your events – it is always nice to have photographic evidence that you are working this as a real business
- Get a tax person that understands the tax benefits available to home businesses – there are a lot of CPAs out there that default to “you cant do that” even when it is a legitimate tax benefit and you have the documentation to back it up.
If you don’t have a plan or have been lax in keeping up with your documentation, I hope this inspires you to take action and do what is right for your home business.
Any other ideas?
Feel free to share any ideas, hints or tips you may have for making a plan and documenting your home business activities.
Originally posted 2012-04-01 01:43:47. Republished by Blog Post Promoter