Finance 8 Home Office Deduction

If you use part of your home for business, you may be able to deduct expenses for the business use of your home. The home office deduction is available for homeowners and renters, and applies to all types of homes. There are a few requirements to claim a home office deduction.

Regular and Exclusive Use: You must regularly use part of your home exclusively for conducting business

Principal Place of Your Business: You must use your home as your principal place of your business. If you conduct business at a location outside your home, but also use your home substantially and regularly to conduct business, you can qualify for a home office deduction. If you use a separate free-standing structure, such as a garage, barn or studio exclusively and regularly for business, you can qualify for a home office deduction.

Additional Test for Employees: If you are an employee and you use part of your home for business, you can qualify for a home office deduction. You must meet the the requirements discussed above plus:

Your business use must be for the convenience of your employer, and

You must not rent any part of your home to your employer and use the rented portion to perform services as an employee of that employer.

If the use of your home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home.

You can figure your home office deduction using either the Simplified Method or the Regular Method.

Under the Simplified Method, you take a home office deduction by multiplying the number of square feet of your home office (300 maximum square feet allowed) times $5.00 per square foot. Thus, the maximum possible deduction is 300 X $5.00 = $1,500. Under this method, the actual expenses of running your home are not taken into account.

Under the Regular Method, you take a home office deduction by multiplying the percentage of your home devoted to business use times the various expenses of running your home, such as mortgage interest, real estate taxes, insurance, maintenance, repairs, and depreciation.

The home office deduction is available to self-employed individuals and to employees.

This article was written by  Donald M. Scherzi, CPA, CFP, LLC

 Mike Lupo, SCORE Counselor

Visit us at: www.scoresouthflorida.net

Florida is doing well...are YOU?

You may have seen the Sun Sentinel article: Florida economy bounces back. It touts a report from Wells Fargo economists. Among other things it says Florida has more than recovered the losses incurred during the recession. That is good news for all Florida businesses. How about yours?

 

Steve Koenig, SCORE Counselor

Visit us at: www.scoresouthflorida.net

 

 

Cybersecurity Tips

Here are ten key cybersecurity tips from the FCC for businesses to protect themselves:

 

1. Train employees in security principles
2. Protect information, computers and networks from cyber attacks
3. Provide firewall security for your Internet connection
4. Create a mobile device action plan
5. Make backup copies of important business data and information
6. Control physical access to your computers and create user accounts for each employee
7. Secure your Wi-Fi networks
8. Employ best practices on payment cards
9. Limit employee access to data and information, limit authority to install software
10. Passwords and authentication

The FCC's CyberSecurity Hub at www.fcc.gov/cyberforsmallbiz has more information, including links to free and low-cost security tools.

 

Steve Koenig, SCORE Counselor

Visit us at: www.scoresouthflorida.net

 

Finance 7 Insuring your small business

 

As a small business owner, it is critical that you have the proper insurance policies in place to protect both you and your business from any number of potential legal issues.

The types of insurance you may need will generally depend on the nature of your business and the  potential business risks you may be subject to.

 

Below are some common business insurance policies you will need to consider:

 

• General Liability
• Property (Building, Equipment, Machinery, Inventory)
• Business Auto
• Home Based Business
• Workers Compensation
• Business Overhead
• Commercial Umbrella
• Errors & Omissions
• Malpractice
• Directors & Officers
• Key Person
• Customer/Client Data Breach
   
  When it comes to purchasing insurance, the following recommendations are suggested:
   

• Purchase only from reputable companies with a strong financial rating
• Shop around to compare prices
• If possible, you may get a better rate if you bundle policies with the same   company
• Don't skimp on liability limits
   
  A  few words on automobiles used in business and home-based businesses.
   
  First, if you have a personal automobile insurance policy and use your auto for business, notify your insurance company to be sure your business use is covered.
   
  Second, if you are a home based business, notify your insurance company as most standard homeowners insurance policies do not provide the necessary coverage for your business.
   
  If you fail to disclose this to your insurance company, you may find that you are not covered for the business use of your automobile and home-based business.
   
   
  This  article was written by  Donald M. Scherzi, CPA, CFP, LLC
   
  Mike Lupo, SCORE Counselor
  Visit us at: www.scoresouthflorida.net
   

Finance 6 How to Deduct Business Use of an Automobile

If you use your car 100 % in your job or business, you may deduct its entire cost of operation (subject to certain limits on depreciation). However, if you use your car for both business and personal purposes, you may deduct only the cost of its business use (business percentage use).

You can figure the amount of your deductible car expense by using one of two methods; the Standard Mileage Rate Method or the Actual Expense method.

Under the Standard Mileage Rate Method, simply multiply the number of business miles for the year by the IRS amount allowed per business mile (which changes each year) to figure your deduction. You may also deduct business parking fees and road tolls. You cannot deduct any other car expenses.

To use the Standard Mileage Rate Method;

For a car you own, you must choose to use it in the first year the car is available for use in your business. In later years, you can choose to use the standard mileage rate method or the actual expense method.

For a car you lease, you must use the standard mileage rate method for the entire lease term (including renewals).

You must not operate 5 or more cars at the same time.

You must not have claimed a depreciation deduction for the car using any method other than straight line.

You must not have claimed a Section 179 deduction on the car.

You must not have claimed the special depreciation allowance on the car.

To use the Actual Expense Method:

You must keep detailed records of the actual costs to operate the car including gas, oil, repairs, maintenance, interest, insurance, registration fees, licenses, and depreciation (within limits) or lease payments. You may also deduct business parking and road tolls.

Finally, the law requires that you document and substantiate your business use of a car by keeping adequate records for all carexpenses, total mileage, business mileage, and personal mileage for the year.

 

This  article was written by  Donald M. Scherzi, CPA, CFP, LLC

Mike Lupo, SCORE Counselor

Visit us at: www.scoresouthflorida.net

Selling Up

Here is an example of a practice that can either lead to added sales or backfire and hurt your business.

 

First you offer a service and either provide a no cost upgrade for one year, or provide an automatic renewal after the first year (at full price). At the end of the first year you bill the customer for the second year at the new rate. The customer may simply appreciate the service and pay the incremental cost. On the other hand the reaction may be very different, leading to an irate customer and possibly a lost customer that will talk up the negative issue.

 

One thing that can help is to make the cancellation as painless as possible. Maybe you can cut the added service out but keep the primary business and look to sell up later.

 

In one case a customer waited over 30 minutes on the phone to resolve the issue, during which time he decided to cancel the entire business with the firm. He may have simply cancelled the added service if the wait time had been reasonable.

 

The choice is yours.

 

 

Steve Koenig, SCORE Counselor

Visit us at: www.scoresouthflorida.net

 

 

Finance 5 Retirement Plans for Small Business Owners

Small business owners have many options when it comes to setting up retirement plans for both themselves and their employees.

 

Some of the more common retirement plans available to small business owners include Traditional IRA's, SEP-IRA's, and SIMPLE-IRA's, and ROTH IRA's.

 

Whether a small business operates as a sole proprietorship (self employed individual), a partnership, a Limited Liability Company, or a Regular or an S Corporation, the benefits of contributing to a retirement plan are numerous.

 

First, the contributions are tax deductible, which lower income taxes. Second, the earnings grow tax-deferred. Third, the business owner is setting money aside for a more secure retirement.

 

And, to encourage people age 50 or older to save even more for retirement, catch-up contributions are allowed for some plans.

 

Each IRA generally has its own rules regarding when it must be set up to be effective for a particular year, the maximum contributions and deductions allowed for a given year, due dates for making a contribution, which employee's must be covered under the plan, when required minimum distributions must begin, which penalties may apply for early distributions, and exceptions to the penalty for early distributions.

 

The tax laws often change each year regarding the specifics for each type of plan, so that the business owner will want to keep current regarding changes applicable to their type of IRA.

 

All things said, setting up and contributing to a retirement plan each year is a win win situation.

 

This  article was written by  Donald M. Scherzi, CPA, CFP, LLC

 

Mike Lupo, SCORE Counselor

 

Visit us at: www.scoresouthflorida.net