Few people realize that starting a side-business on eBay is
actually a great way to save money on your taxes. The trick is
to make sure you’re putting all the additional expenses you
incur against your additional income. Running an eBiz allows
you to take numerous deductions that can add up to a lot of
savings.
Deduct Your Home Office
By definition, if you’re an eBay seller, you have a home
office. You have to have a space that’s used exclusively for
business, whether it’s in your spare room or your basement. But
having this allows you to take a percentage of your mortgage
interest, your utility bills, your homeowner’s insurance, and
your homeowner’s dues as deductions against your business. And
if you use your home to store inventory, even if it doesn’t
have its own room, you can include that space in your
deductions as well.
Deduct Your Children’s Pay
Rather than giving your kids allowances, pay them to help out
with your business. You’re moving income out of your tax
bracket, and you can pay them up to $4,900 a year before
they’ll have to pay taxes on it. Tax strategist Diane Kennedy,
of TaxLoopHoles.com, says there are three rules to employing your child:
1. Have some kind of written job description.
2. Make sure they’re keeping track of the time they actually
work.
3. Pay them a reasonable wage.
Says Kennedy, “Take a look at…personal expenses and how they
could become business expenses. Things like employing your
kids, having a home office, maybe your car you’re using to run
errands—look at all the things you’re spending money on now
that could become business deductions.”
How to Protect Yourself
You need to be able to prove your deductions are legitimate
business expenses, so it’s crucial you keep good paper work on
everything. Track where your money’s coming from and what your
costs are, and have documentation to back it up. Should the
government ever have questions, you’ll be glad you did.
Good record keeping will go a long way towards satisfying the
IRS. But you can lessen your chances of getting audited in the
first place by forming a corporation or an S-Corp. If you
default to a sole proprietorship, you have a one in twelve
chance of being audited. Incorporating also gives you certain
tax advantages.
When done properly, selling on eBay allows you to save money on
the back end with taxes. As Kennedy says, “So many people don’t
realize that just by having this little side business, they can
actually immediately start paying lesser taxes. In fact, we say
‘eBay tonight and pay less taxes tomorrow.’”
Copyright © 2006 Chris Malta and Robin Cowie
About The Authors: Chris Malta and Robin Cowie of
WorldwideBrands.com are the Writers and Hosts of The
Entrepreneur Magazine EBiz and Product Sourcing Radio Shows.
www.worldwidebrands.com for more FREE eBiz info from Entrepreneur Magazine Radio!
|
