I am starting up my own business and I have some tax questions for all yall out their that are in the tax field or are self employed as well. First question is if I want to right my vehicle off on taxes do I have to drive around with business signs on it? I am aware of being able to right off office space to my house or something of the sort. Any more things I should be aware of? Ways to get around tax things?
A business sign doesn't mean anything. If you do use your vehicle for business purpose, the IRS requires you to keep a daily mileage record which includes where you go, the distance that you ravel, and the business purpose of the trip. That's often the first thing that they ask for it during an audit. You should also keep track of the odometer of your vehicle at the beginning and the end of each year so you will have the accurate annual total mileage. If you use your vehicle partly for personal purpose, you will need the annual total mileage and your business mileage in order to come up with the business percentage (deductible portion) of your auto expenses. http://www.unclefed.com/TaxHelpArchives/2006/HTML/p463/ch04.html#d0e3114
Speak with an accountant. Will probably advise not to deduct for home office. Should also help with your self-employment tax and the prepaid taxes you'll need to pay. The accountant will pay for him/herself many times over.
As I understand things, you have to use your home office for 100% business or it's not deductible. You should also be aware that it is 'write off', not 'right off'.
My family has had a self-employed business for 35 years. They have yet to ever deduct for mileage OR the home office. The car is very hard to prove for mileage, and it is very hard to prove that your home office is 100% business usage only. My writing off those two things, you raise the two biggest red flags to the IRS for a small business audit that exists. Good luck in your business, but I'd certainly talk to a CPA. You should also be aware that you will have to pay self employment tax on your earning as well as make quarterly estimated tax payments.
Avoid the home office write off. As Supermac stated, its a big red flag and the savings are not all that significant. As far as a vehicle, I would certainly write that off at .58 cents a mile (or whatever it is now). All you need is records kept of your mileage.