This is a guest post by Tyler Wells who is a certified public accountant. For all of you who don’t know Tyler, he’s an unrepentant nerd for numbers with a passion for accounting, finance, and small business. Tyler’s love for entrepreneurialism took root while working on his family’s exotic animal farm and blossomed while advising entrepreneurs as a Peace Corps volunteer in Guatemala. Currently he is building an entrepreneurial practice as a Certified Public Accountant and blogs at WebBizFinance.com.

Choosing an accountant is a bit like choosing a life partner, it can be too easy to rush into a relationship, make a choice for all the wrong reasons, and once you’ve finally realized that you made a mistake, find out changing can be a real headache, not to mention expensive. Well, it’s not totally like a romantic relationship because at least accountants don’t …

In this article I present the conclusion of my experiment on whether hiring an accountant to do your taxes is better than using turbo tax or tax cut. If you missed part one of this experiment, please check it out here first before reading on.

Photo Youssef Abdelaal

So the results are in! The good news is that our accountant fulfilled his promise and delivered our tax return way ahead of the April 15th deadline. The bad news is that our experiences with our accountant weren’t exactly positive.

Before I continue, I just want to emphasize that the conclusions I’m making in this article should be taken with a grain of salt and are not indicative of accountants in general. There are thousands of CPAs out there and our experiences represent just a single data point.

To provide some background information, my wife and I have worked with this accountant …

This is part 1 of a 2 part series on hiring an accountant versus using Turbo Tax or Tax Cut. The second part of hiring an accountant versus using Turbo Tax or Tax Cut can be found by clicking here.

This year marks the first year that my wife and I are hiring an accountant to do our taxes for us and I’m pretty nervous about our decision. Even though I absolutely hate doing them, I’ve filed my own taxes for well over a decade now and I’ve done so because I prefer keeping my financial data private. I also like the feeling of control I get from being able to see how all of the numbers are calculated. That’s not to say that I don’t trust my accountant but while we’ve had an accountant for quite some time now, we’ve only used him as an advisor …

Many would be entrepreneurs hesitate to start their own business because they think it is too risky from a monetary perspective. In fact, most people don’t think starting a business is even worth trying unless they can come up with a grand slam profitable idea. Of course profitability is an extremely important factor with any business, but what if I were to tell you that you could save a decent amount of money every year with your business while only making a small profit or none at all?

Photo by Chasing Fun

That’s right! Most people don’t consider the tax savings involved in running a business. Most people don’t realize that having a day job is one of the worst ways to save on taxes because Uncle Sam takes a huge chunk out of your paycheck BEFORE you pay for anything. On the …

After reading my series of articles on how to save money on your taxes, a buddy of mine decided that he was going to start taking extra tax deductions by turning one of his hobbies into a business.

Hey Steve! You know how I love to paint right? And just the other day I sold a painting to someone on Ebay… Why don’t I just call this a business and declare business losses off my tax return? May as well right?

At first glance, my friend’s logic sounds reasonable. After all, he does create paintings that are sold for profit as a side business. So shouldn’t he be able to take business deductions and losses for all expenses incurred while painting?

Unfortunately, the answer to this question is a bit complicated. While my friend is technically allowed to deduct business related expenses for his painting business, the …

The tax laws in the United States are always in a constant state of flux. Every small business owner needs to be on top of new tax laws as they are enacted in order to make key decisions on business expenses. Normally, there are only minor changes to the tax law from year to year. But the year 2008 has been a bit of an anomaly since so many tumultuous activities have happened all at once. I’ll try and outline some of the new tax changes that are the most likely to affect the common business owner or real estate investor.
The Homeowner’s Deduction Has Changed For The Worse
After all of the bad loans and speculative buying that led to the real estate debacle, Congress has decided to crack down on the tax deductions for homeowners. In the past, you could exclude up to 250K(or …

In order to deduct your home office, your business must follow the following rules.

Your home must be your principal place of business. This means is that you conduct all of your business related activities in your home and you have no other set locations where you do business
You must have a special area sectioned off for your business. This might be a separate room or the garage. Anywhere that you store inventory or products counts as well.
You must actually conduct business at home and use the dedicated space solely for business. This one sounds like a no brainer, but this is to prevent people from setting up a fake office and taking it as a deduction. What this also means is that you should remove the bed and dressers from the room as well.

If you meet the above rules, the way you handle the deduction depends …

The biggest advantage for small businesses is a little Internal Revenue Code known as Section 179. Section 179 allows small businesses to deduct up to 108k of assets completely every year. What this means is that you can deduct up to 108k of business equipment, computers, furniture etc… without having to worry about depreciation or other tax calculations. Of course, section 179 comes with a few requirements that must be met.
Purchases must be used mostly for business
The official rule is that the asset that you are deducting must be used for at 50% or more for business. Let’s say for example that you are trying to write off a computer in its entirety for a given tax year. You should make sure that you are using this computer more for business more than pleasure and be able to demonstrate this if you ever get …

Deducting entertainment and meals is often a gray area that people take advantage of. My general rule of thumb is that as long as you don’t abuse the tax code, you should be fine. I use what I call the “bullshit” code. If I can tell my wife with a straight face that a particular expense was used for business purposes, and my wife doesn’t think its BS, its usually good enough for me.
Officially though, anything you expense must obey the following rules.

The entertainment expense must be reasonable and accepted in your field of business – For example, if I’m selling vegetarian food over the internet, it most likely wouldn’t fly if I took the employees out for a steak dinner. In any case, you get the point.
The purpose of the entertainment expense must be to bring in revenue – For example, if you are hosting …

Ever heard your spouse complain that you never go on enough vacations? Using your business as a tax shelter is a great way to fund your next vacation without breaking the bank. With proper planning, you can get your business to pay for and write off most of your trip!
For starters, the trip’s primary purpose must be for business. As long as your destination is not completely random, chances are you can find a way to do business there. Below are some general guidelines on what and how you can deduct during your travels. Keep in mind that you can only deduct expenses on those days in which you are actually conducting business.

Lodging is can be deducted in its entirety
Food can be deducted 50%
Transportation can be deducted 100%
Laundry and Mobile Office related fees can be deducted 100%

There are 2 ways of deducting your …

One of the key reasons for starting your own business is that it can provide an effective tax shelter. Many of the expenses that you incur during day to day operations can be deducted directly from your taxable income. Since there are many misconceptions regarding what can and can not be deducted, I thought that I would go over some of the common items that small businesses can write off.
The Tax Code
The tax code is a little bit vague which is why many people get themselves into trouble. A deductible business expense is defined as any expense that is ordinary and necessary for the business and not extravagant. The expense must also be primarily used for business and not for personal reasons. While it is up to you to interpret the above statement, its best to always error on being conservative. For example, …

Deducting your vehicle as a business expense is a bit tricky but well worth it, especially if you’re putting a lot of miles on your car. The number one rule of thumb when expensing your vehicle is to keep detailed records. Make sure you use a trip or mileage log and write down each and every mile that you are using the car for business. This sounds like a major pain, but its not too bad if you keep a log book and pen in your car at all times. Whenever you drive somewhere, just write down your starting and ending odometer value for all business related travel.
There are 2 main ways to deduct your car, the mileage method or the actual expense method.
The Mileage Method
This is the simplest way to deduct the use of your car. Simply take the number of miles that …