LANDLINE MAGAZINE
JULY/AUG 2008
ARTICLE07/08
HOME BUSINESS USE, SOLE-PROPRIETORSHIP,
SOCIAL SECURITY, STATE & LOCAL TAXES
Question: I do my
paperwork in my home. Can I deduct the business use of my home?
Answer: Your principle place of business can be the location where the most important activity of that business is preformed. Even though you are out on the road making your pick ups and deliveries, the administrative and management part of your business is most important. To qualify for the business use of home deductions, there can be no other place for you to perform those services. You need to have an area in your home that you use regularly and exclusively for the business. Once a year is not enough to constitute regular use, but if it’s once a week, you have a better chance of substantiating the deduction than if it’s once a month. It is best if the home office is a separate room used as an office only. But, any part of a room will qualify as long as the area is used for business only.
If you work at home as an employee rather than being self employed you have to meet the same requirements and you have to be doing the work in the home for the convenience of your employer. That means your employer cannot provide you with an office to do the administrative work and your employer requires you to do it at home. Though legal, the deduction is one that is scrutinized somewhat more by the IRS.
Question: I’ve been
in business and some of my friends have told me that I should incorporate. What
is the best way to run my trucking business?
Answer: We suggest truckers new to business to begin their operation as sole proprietors. Sole proprietorships are the simplest form of business to own and operate and are the least costly to set up. They are not considered a separate legal entity. No separate tax returns are filed by sole proprietorships. The sole proprietorship business is reported as part of the owner’s Individual income tax return. While sole proprietorships are the easiest business form to set up and the cheapest to operate the owner of the sole proprietorship is responsible for any liabilities of the business. Therefore, examine your assets prior to going into business and consult with an attorney if you feel you need liability protection.
Question: Can I pay
Social Security tax voluntarily if I am unemployed or my business income is
very low? I’m concerned that my Social Security benefits will be reduced.
Answer: You cannot pay extra money into your Social Security account to increase future benefits. Social Security is based on the level of earnings in the 35 highest earning working years. It is therefore possible that a period of unemployment or low earnings will not affect your future benefits.
Question: Are the
State and local taxes I pay deductible?
Answer: Yes. State and local taxes are deductible on Schedule A in the year the taxes were actually paid. It does not matter how the taxes are paid, whether through withholding, estimated tax payments or payments for prior year returns. Note: Penalties and interest are not deductible.
This article has been presented by PBS Tax & Bookkeeping
Service, a company that has been providing income tax and bookkeeping
services to the trucking industry for over a quarter century. Contributions to this article were made by
“Everyone’s financial situation is different. This article does not give and is not intended to give specific accounting and/or tax advice. Please consult with your own tax or accounting professional.”