Did you turn your passion into a business? If so, that’s awesome, however if your passion isn’t tax law you will quickly find yourself in a tax nightmare and facing the closure (or bankruptcy) of your business without good tax advice. Each week I will provide you with tax information to assist you in your business. This tax information is general in nature and should only be used after consulting with at tax professional to determine how it can be best utilized by your business.
Don’t let taxes bankrupt your business!
There is a high tax audit rate for sole proprietor businesses reported on Schedule C of the 1040 U.S. Individual Income Tax Return. Sole Proprietor businesses typically don’t have the largest revenues of all the various business types; however they are the most likely business type to not seek out highly qualified tax professionals to assist them with tax compliance.
Tips to prepare for a possible audit
- Keep records separate. Co-mingling funds is the fastest way to get a business deduction allowed. Your business should have a checking account and credit card separate from your personal accounts.
- Keep logs and receipts. Keep a log for business miles. Keep receipts for business meetings and meals. Include the date, time, subject, and who was present at the meeting.
- Legitimate business expenses. Business expenses should be ordinary (common and accepted in your industry) and necessary (helpful and appropriated for your business)
- Business vs. hobby. A qualified business activity allows for direct deductibility of appropriate expenses, where-as hobby activity expenses are only allowed as a miscellaneous itemized deduction subject to passing a 2% adjusted gross income threshold. There must be a profit motive and active participation in the activity to qualify your activity as a business. If your business has been operating at a loss for several years this could increases your chances of being audited.
Please don’t let the fear of an audit prevent you from deducting legitimate business expenses. Just keep excellent records and be prepared to defend your position.
Yolanda Johnson, EA, MSA is a Senior Tax Accountant with Tax Accountants, Inc. and knows the significant impact taxes have on daily finances. She strongly believes that everyone deserves access to quality tax information and a tax professional with a high-level of professionalism and expertise in the area of taxation. As a result, her passion is to provide tax education and thus educates numerous taxpayers at seminars and on her radio show "Tax Matters"
Yolanda earned a Master of Science degree in Accounting with a specialization in Taxation and an Enrolled Agent designation (EA). As an Enrolled Agent she is admitted to practice before the Internal Revenue Service.
With IMAN's 15th Anniversary Takin' It to the Streets happening in June, the organization, on April 27, provided artists from across the country with the unprecedented and extraordinary opportunity to open up for Streets 2013 headliner, Black Star (Yasiin Bey-aka Mos Def- & Talib Kweli) with Ali Shaheed Muhammad.
Seven winners earned a "Live Audition" slot at this month's Community Café on Saturday, April 27. An all-star panel of judges which included Enoch Muhammad of Hip Hop Detoxx and the audience selected the winner, Kuumba Lynx who secured a 10-minute slot before the Black Star performance on Saturday, June 15th in Marquette Park.
Tasleem Jamila and Lawrence Binkey Tolefree hosted this event with DJ Sadie Woods providing the music and a special spoken word presentation by Amir Sulaiman of Sidewalk Chalk. The main event is coming in June.
This is one of the hallmark events of the summer that is a must attend for anyone of goodwill who loves hip-hop culture, Islam, or social conscious gatherings.
This Takin’ It to the Streets on Saturday, June 15 will open up with a Summer Peace Rally led by the Chicago Peace Movement (convened by the Lupe Fiasco Foundation) and the United Congress of Community and Religious Organizations (UCCRO).
This Rally will feature activists, religious leaders, artists, and other organizational allies and partners from across Chicago and the country.
All those expected to be in attendance have been galvanizing and agitating around community-driven and community-centered solutions to the structural problems that lead to the violence afflicting urban centers like Chicago. The Peace Rally will feature comments and special appearances from prominent hip-hop artists and activists.
The Inner-City Muslim Action Network (IMAN) is a community-based nonprofit that works for social justice, delivers a range of direct services, and cultivates the arts in urban communities.