Do You Know Your Equipments And Nuts And Bolts Of Your Business?

Summary: An attitude of intimacy with your tools and equipments provides a great help in your career. Besides taking care of equipments, knowledge and awareness about your taxation too is equally important. You should maintain your records for deductions.

Tools and Intimacy



Before leaving our section on technology, I want to mention an attitude about your business tools that will help assure your success in a self directed career. It's the attitude of intimacy: knowing your equipment, as well as the nuts and bolts of your business, very well. In discussing intimacy in Leadership Is an Art (New York: Doubleday, 1989), Max DePree says:

So why complain, as an entrepreneur, that you have to fix your own paper jams, make sense of computer manuals that don't, open all the mail, pay all the bills and keep records of 25 cent phone calls? Why complain about a process that involves you in the details that make your business tick? Instead, you can gain entire new levels of appreciation and respect for your work and, guess what, for yourself. It's called pride of ownership.

Here's a great example of the value of intimacy: In my town, a company called Harrisville Designs makes looms for hand weavers. But based on years of experience in helping their customers get started in weaving, the company doesn't sell looms already put together. It sells only kits. Before learning to weave, customers must first assemble their loom. Only then do they learn how it really works and gain the amount of intimacy necessary to make it work well. It's the same with computers and other office equipment. Allot plenty of time for really getting acquainted with your system. Then, you'll truly own your business and, perhaps, begin not to resent being involved in the details.

Taxes

We covered most of the basics of finance in Chapter 4. If you took the advice there, you've figured out a way to get started in your dream form of self employment without going into debt (at least not deeply). All you have to worry about now are making bank deposits and keeping track of bills, taxes and, if necessary, payroll. A simple accounting program such as Quick books can handle all of this. Here are three noteworthy points on taxes:

1. Record keeping for tax purposes will keep you busy. If you've been on someone else's payroll for years and never dealt with having other kinds of income or related expenses, you've got a few things to learn. Fortunately, while it's still no fun to hand over all that money to various levels of government, the procedures aren't all that onerous, assuming you have the help of a competent accountant when needed. Here's one caution, however: Don't get caught wildly underestimating (or failing to address) your quarterly federal income tax payments. More than a few well intentioned businesspeople have slipped here.
2. What about home office deductions? It's always a popular question and likely to remain so. A 1993 Supreme Court ruling severely limited the home office deduction, and although IRS rules issued since then seem to leave more opportunities to qualify, it's not clear sailing. The deal is: You have to show not only that your office is your headquarters, but also that it's where you provide your services.

The Supreme Court disallowed the home office deduction of an anesthesiologist because the court said his most important work was done outside his office, at hospitals, even though he had no offices there. This seems to leave the status of many independents in question. Here are four examples of how the IRS feels:

1. A self employed author spends 30 to 35 hours a week in his home office, and 10 to 15 hours else where doing research, meeting with publishers and attending promotional events. The IRS says he qualifies because the "essence" of his work is done at home.
2. A self employed retailer of costume jewelry spends 25 hours a week handling orders and doing office work at home, and 15 hours a week selling at craft shows and consignment shops. In a close call, the IRS says okay, because her selling activities are at such a variety of other places.
3. A teacher spends 25 hours a week at school, where he shares a small office, and 30 to 35 hours a week working at home. Because the "essence" of his job is at school, the IRS says no home office deduction.
4. A self employed plumber spends 40 hours a week at customers' homes and offices, and 10 hours a week in his home office, where he has a full time employee doing office work that supports his practice. No dice, says the IRS: the "essence" of his work is elsewhere.

Talk to your accountant and keep your eye on Congress. Rules and interpretations can change anytime.

Can I deduct my business equipment all at once? During the first year on your own, when you've got no track record on which to estimate your taxes, you may be wondering if you'll have the flexibility of writing off a big chunk of your equipment in order to minimize a sudden tax problem. The answer is a qualified yes. A special allowance on expenses lets you deduct up to $17,500 of qualifying equipment costs in any one year, instead of depreciating those items over several years. Ask your accountant for details.