Hi Kathy...
here in New Hampshire you do not have to register a business, get a
'tax number'
or anything...as long as you 'acknowledge' the business name you use.
So it is easy enough to start up a business as a 'sole proprieter'
and then write off
all the business expenses.
You will have to check on YOUR local state rules-and if you haven't
done it yet,
get to a bookkeeper/accountant or for the least expensive way-check
your local
H&R Block. You will NOT need someone to do your daily or weekly
paperwork-
that's a high priced secretary basically-and you can do all of that
yourself with a
commercial 'business' checking account system. This starts you off
with an easy
to follow 'paper trail' of all your expenses. Quicken for your
computer can do it-and
also generate your invoices and billings.
Is it necessary? Yes-if you intend to 'deduct' business expenses to
lower your taxes,
you have to do the required paperwork (paper trail) to show where it
all goes.
A local 'tax person' (like mentioned above) will know the laws for
your state as to whether
you MUST register as a business (have a tradename, get a tax number,
collect sales tax, etc.)
and if you DON'T do that...it can cost you a hefty fine. It is common
now that we get
a phone call or letter in December from every company, business,
school, etc. that we
have sold to wanting a form filled out with our 'tax ID number'
because THEY have to have
that on file for 'their' end of the year tax forms. Another way for
'big brother' to keep tabs on
you. If you can't produce that number-you are cut off from doing
business with them again!
Thankfully here in NH there are NO sales taxes or business taxes-but
I had to get a
FEDERAL tax number (because of employees) and that number counts.
Rule of thumb-most businesses fail in the first 3-5 years-so the IRS
doesn't expect you to
be making a profit for those first couple of years, and you don't
have to be worried about
an audit because you 'lost money'. Even if you are taking a paycheck
and covering your
bills, you CAN still be 'losing money' because of the expense of
setting up your business.
Paid cash for your Amaya? $15,000 + supplies, converted the garage,
did some Ads, etc.-
you spent $25,000 this year probably. Only sold $5,000 worth of stuff
since you started in
December. Good! On paper you just LOST $20,000 this year! Isn't
modern math great?
And a good tax preparer will show you how you can move that loss
forward AND backwards
to reclaim previous taxes you paid in...carrying it forward helps
take the bite out of the
profit you want to make next year and the government will want a
chunk of it.
So find a good tax person/accountant but don't get suckered into a
'weekly' or 'monthly
service. We use our local H&R Block man-for over 20 years. He does
our 'quarterly' wage
statements to the state and federal, and yearly tax filings for
business and personal.
I think we pay him a total of around $600 a year or so...and we did
over $225k a year.
Everything else we do right here with Quicken.
Roland
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