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Home Business Tax Tips You Can Count On !

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Home Business Tax Tips You Can Count On !

Postby Ross » Sun Jan 11, 2004 7:34 am

I am a subscriber to Ron Mueller's Home Business Tax Tips Guide and a affiliate of his products.
What I would like to do is post his regular email Tax Tips series which are invaluable if you are involved in home business.

If you have questions about Ron's Tips leave them in this thread and I'll see if I can't get him to drop by sometime with some answers

=============================================

You can legally save THOUSANDS of dollars in taxes
by employing your family members in your home-based
business, as described step-by-step in Chapter VI of
“It’s How Much You KEEP, That Counts! Not how
much you Make.”

(If you don’t yet have a copy, you can still get it for as
little as $37 at www.HomeBusinessTaxSavings.com.)

Several of you have written-in to ask how many hours
a family member must spend on “home business” work
in order to qualify. Good question.

I’m about to give you the entire IRS answer, but – if
you’re one of those people (like me) who wants the
“bottom line” FIRST……

THE ANSWER IS 100 HOURS PER YEAR
which is equal to 8.3 hours/month, or 2.1 hours per
week (see #3, below).


Now, here’s the Official Word from the IRS…

GUIDEBOOK, 2001USMTG 2059,
Passive Activity Defined:

A passive activity is one that involves the conduct of a
trade or business in which the taxpayer does not materially participate (Code Sec. 469(c) ).[ 2001FED 21,960 ]

Any rental activity is a passive activity whether or not the
taxpayer materially participates. However, there are special
rules for real estate rental activities (see 2063 ) and real
estate professionals (see 2064 ).

Generally, to be considered as materially participating in
an activity during a tax year an individual must satisfy
ANY ONE of the following tests:

(1) he/she participates more than 500 hours;

(2) his/her participation constitutes substantially
all of the participation in the activity;

(3) he/she participates for more than 100 hours and
this participation is not less than the participation of
any other individual;

(4) the activity is a "significant participation activity"
(see below) and his/her participation in all such
activities exceeds 500 hours;

(5) he/she materially participated in the activity for any 5
years of the 10 years that preceded the year in question;

(6) the activity is a "personal service activity" (see below)
and he/she materially participated in the activity for any
three years preceding the tax year in question; or

(7) he/she satisfies a “facts and circumstances” test that
requires him/her to show that he/she participated on a
regular, continuous, and substantial basis
(Temporary Reg. §1.469-5T(a) ). [ 2001FED 21,965 ]

Special rules are also provided for determining the material
participation of limited partners
(Temporary Reg. §1.469-5T(e)(2) ),[ 2001FED 21,965 ]
certain retired or disabled farmers
(Temporary Reg. §1.469-5T(h)(2) ),[ 2001FED 21,965 ]
and personal service and closely held corporations
(Temporary Reg. §1.469-1T(g)(2) and
Temporary Reg. §1.469-1T(g)(3)(i) ).[ 2001FED 21,962 ]

Significant Participation Activity:

A significant participation activity is one IN WHICH THE
TAXPAYER PARTICIPATES MORE THAN 100 HOURS
DURING THE TAX YEAR but does not materially
participate under any of the other six tests set forth above
(Temporary Reg. §1.469-5T(c) ).[ 2001FED 21,965 ]

Personal Service Activity.

A personal service activity involves the performance
of personal service in (1) the fields of health, engineering,
architecture, accounting, actuarial services, the performing
arts, or consulting or (2) any other trade or business in
which capital is not a material income-producing factor
(Temporary Reg. §1.469-5T(d) ).[ 2001FED 21,965 ]
Ross
 
Posts: 68
Joined: Sat May 03, 2003 10:04 pm
Location: Burnaby BC Canada

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