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It is always the earnest wish of a home business owner to keep a tight control over expenses. Going down the funnel of expenses are additional dollars by way of taxes. Let’s find out what you can do to avoid putting fewer taxes down that funnel…

• First of all, you need to make some strategic planning months before the due date of filing your tax return looms on the horizon. Let’s assume you have a home business of making and selling soft toys. Maintain a file of all receipts, not just of sales to customers, but also of items bought from suppliers, such as fabric, buttons, etc.

• Keep a detailed record of how much fuel your car has guzzled up during business related trips, such as delivering the toys to a customer, meeting a supplier, etc.

• Make an accurate assessment of how much profit your business has generated and the amount of loss you have incurred. If you realize that your profit graph is showing an upward trend, spend some dollars on, say, an additional sewing machine. If, on the other hand, the graph reflects a downward trend, you could avoid putting dollars into your own salaried account.

• Find out if there is a customer who owes you money, however small an amount it maybe. For example, a playschool may have ordered three soft toys. The playschool owners suddenly move out to another address, without paying up. You can list the amount they owe you as bad debt, and have it deducted from your taxes.

• Keep documentary evidence of the salary you are paying the persons who are helping you in the business, even if they are your family members. Don’t assume that just because it is your daughter who is helping you, and not an outside employee, you don’t need to maintain a payroll record. You do need to submit the relevant forms vis-à-vis employee taxes. It is vital to submit the W-2 forms in January; otherwise you will be staring at an official document asking you to pay a penalty.

• Open your heart to a charitable organization. For example, you could donate some soft toys to an orphanage. You will not only light up a child’s life, but also obtain a tax deduction.

• It is also a great idea to operate your home business from your own residential premises, rather than from a rental space. You are not only handing over fewer dollars towards monthly rent, office furniture, etc, but also getting a tax deduction. You need to demarcate a specific area of your home for use as a business place, but this area should not be expansive. It could be, limited, for example, to the small den.

• Finally, you seriously need to think about a crucial makeover: becoming a corporation, rather than being the sole owner of your soft toy business. You need to submit the requisite documents as per your State laws on incorporation. The befit of such a move is to hand over fewer dollars in terms of a self-employment tax.

These tips are but a few that will stop you from shuddering every time the tax date lurks in the shadows.