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A Home-Based Business Online
Practical home business ideas, strategies
and resources for the work-from-home
entrepreneur
November 12, 2000
Editor: Elena Fawkner
Publisher: Fawkner Publishing
http://www.ahbbo.com
Contact By Email
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IN THIS ISSUE
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
1.
Hello again and a warm welcome to all the new subscribers who
have joined us since the last issue!
First off, I forgot to update the autoresponder address for last
week's article, Running Your Own Race, as several kind souls
have pointed out over the past week. Sorry about that. It's at
mailto:ownrace@ahbbo.com .
Second, three announcements about the new site. The first will
be good news for those of you who write your own articles and
are always looking for new submission points. Although editorial
policy for the AHBBO ezine is that, as a general rule, I don't run
guest articles, I am going to start accepting guest articles at the
AHBBO website. If you would like your article(s) considered for
inclusion, please email them to AHBBO's marketing administrator,
Jan Taylor at
mailto:jan@ahbbo.com?subject=AHBBO_Article_Submission .
The second announcement is good news for those of you with
a product, service or business opportunity to promote. I will
shortly be adding a free classified ads section to the AHBBO
website. To submit your ad, just go to
http://www.ahbbo.com/classifiedads.html and complete the form.
All the rules and guidelines are set out for you there. And NO,
I won't be banning MLM ads. And YES, I will be banning ads
for pyramid schemes (so don't even THINK about trying to post
those stupid send $5 to each of the ten names on this list type
deals). Also, if you'd care to write an article about your business
opportunity send that in too and I'll link to it from your ad. For
MLM'ers, here's your chance to set the record straight. Please
note though, and this goes for everyone, that an article is NOT a
sales letter. An article is an informative piece highlighting the
advantages and disadvantages of your *particular* business
opportunity. It must help the reader make an informed decision
about your opportunity. Preference will be given to those pieces
that make an honest attempt to tell it like it is.
Finally, I will shortly be adding discussion forums to the AHBBO
website. In addition to a general '"free for all" type of board, I
also have in mind a few specialty boards for those of you
in certain situations, in particular WAHPs (work-at-home parents),
seniors and MLM'ers. I would be interested in your feedback on
this idea. Any thoughts? Any particular special interest groups
you think should be added to this list? Let me know at
mailto:elena@fawkner.com?subject=Boards . Thanks!
OK, onto this week's issue. This week sees the start of a new
segment. Since j.l. Scott's Pro-Motion column is now no longer
in ezine syndication (you can still read it at the AHBBO website
though at http://www.ahbbo.com/pro-motion.html ), I've been
looking for something to take its place. Well, this week, I found it:
Tips from the Newbie Club. It's at segment 4. Although this
segment is targeted predominantly to those new to the internet,
just because you're not a newbie, don't overlook it. We can all
do with getting back to basics every now and then.
This week's article looks at the home office tax deduction, a
subject a number of people have written to me about over the
past few weeks. Can you tell tax time is looming? So, if you're
running a business out of your home or thinking about it, this
week's article is essential reading.
As always, thanks for reading and I hope you enjoy this week's
issue.
Remember, this ezine is for YOU! If you have comments
or suggestions for topics you would like to see addressed,
or would just like to share your experiences with other
subscribers, I want to hear from you! Please send comments,
questions and stories to Contact By Email .
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2.
Most Travel Clubs are organized on the premise of building a
sizable membership capable of negotiating discounts with various
travel providers.
The Travel Club makes money earning a commission every time
a member purchases airline tickets, books a hotel room, or goes
on a cruise. Today, things have changed quite a bit.
SELLING MEMBERSHIPS
With a swelling membership basis it is difficult for travel clubs to
ignore the profits of charging for membership, no matter how
insignificant the amount. With 10,000 members, a travel club
charging only $20 a year will earn $200,000 in membership dues.
This revenue is over any commission the Club earns when a
member travels.
SPLIT DISCOUNTS
A Travel Club normally acts as a travel agent for the exclusive
use of its members. As an "agency", it gets standard agent
commissions from airlines, hotels and cruise lines. This can
range anywhere between 10% and 18% of the purchase price.
What travel clubs usually do is offer its members a rebate
equivalent to 50% of its commission (meaning 5% to 9% of
their purchase price). If the member spends $1,000, he/she
gets back anywhere between $50 and $90. This is enough
reason for people to join a travel club, especially if the
membership dues are just $20 a year.
ALL-CRUISE
As today's market shifts from the "all-in-one" and "do-it-all"
service companies to that of "specialized" services, so do
travel clubs. Based on industry statistics, the best area to
specialize in is the Cruise business, the fastest-growing
segment in Travel.
YOUR BUSINESS
Sell memberships to your All-Cruise Travel Club and offer rebates
on all cruises and peripheral services the member books through
the club. Find products or services that you can give as bonus for
signing up for a year's membership.
You may even want to seek distributors who will purchase
membership cards in advance, at 15% of the retail price. This
means that if the membership retails for $20, a distributor buys it
from you for $3. If you sell 10,000 memberships this way, you've
just earned $30,000. Then, add to this revenue from commissions
when members take a cruise.
------
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3.
© 2000 Elena Fawkner
Yay! It's tax time again (or near enough). I can't wait. Just love
this stuff. Not! OK, I know it's boring, I know your eyes glaze
over at the mere thought of all those forms and paperwork but it
has to be done so let's just bite the bullet and get on with it.
Now let's start with the fact that there's no substitute for a
qualified professional when it comes to this sort of stuff so I'm
not going to attempt a comprehensive survey of everything you
need to think about when it comes to tax and your home business.
What we're going to look at in this article is *one aspect* of home
business taxation in the U.S.: the home office deduction. By
having a working knowledge of this deduction BEFORE you hand
everything over to your accountant will not only save both of you a
lot of time (and therefore expense), you will be able to make sure
you're keeping good records for everything you need to. Although
this article considers U.S. tax law, many other countries have
enacted similar laws so if you're outside the U.S., check with your
local tax office to see what comparable deductions may be available
in your country. I know, for example, that the Australian home
office deduction is very similar.
I figured a good place to start researching this article was the IRS
itself. Clever, no? There's a pretty handy flowchart at the IRS site
that sets out quite clearly the elements you need to satisfy in
order to deduct the business use of home expenses, so we'll
just follow that. If you're interested in checking it out for
yourself, it's at http://www.irs.gov/forms_pubs/graphics/15154t01.gif.
WHAT IS A HOME?
For the purposes of the home business deduction, a "home"
means a house, apartment, condo, mobile home or boat as
well as other structures on the property such as a garage,
shed or barn. It does not include property used exclusively
as a hotel or an inn.
IS PART OF YOUR HOME USED IN CONNECTION WITH
A TRADE OR BUSINESS?
If not, you can't deduct business use of home expenses. Duh.
Stop reading now.
In order to satisfy the trade or business use test, you must use
part of your home in connection with a trade or business. So
far so good. But if you use your home for a profit-seeking activity
that is not trade or business, you cannot claim a deduction for
the business use of home expenses. A good example given by
the IRS is research you undertake for your own private
stockmarket investments. Although this is a profit-seeking
activity, you are not involved in the trade or business of
stockbroking or dealing and so you cannot claim the home
business deduction.
IS THE USE REGULAR AND EXCLUSIVE?
OK, this is where things get a little trickier.
=> The Exclusive Use Test
To qualify under the exclusive use test, a specific area of your
home must be used solely for your trade or business. It can be
a separate room or part of a room but it need not be marked off
by any form of permanent partition.
So, if you have an "L" shape living room/dining room area
and the dining room area is hived off as your "office" and is used
for no other purpose, then this satisfies the exclusive use test.
If, however, you clear the dining table of your papers every night
so the family can use it for dinner, you don't meet the exclusive
use test. So confine family meals to the kitchen! Easy.
=> Exceptions to the Exclusive Use Test
The only exceptions to the exclusive use test are if you use
part of your home for the storage of inventory or product
samples or as a day-care facility.
If you use part of your home for storage of inventory or product
samples, although you don't have to satisfy the exclusive use
test, you must meet all of the following tests instead:
* you keep the inventory or product samples for use in trade or
business;
* your trade or business is the wholesale or retail selling of
products;
* your home is the only fixed location of your trade or business;
* you use the storage space on a regular basis; and
* the space you use is an "identifiably separate space" suitable
for storage.
Therefore, if you store your inventory of knitting wool for your
internet business of selling wool, knitting patterns and knitting
needles in your basement, then you will still be able to deduct
your basement expenses (or part of your basement expenses)
even though your basement is also used as a recreation or
workshop area.
=> The Regular Use Test
In addition to satisfying the exclusive use test, you must also
satisfy the regular use test.
This means that you must use the specific area of your home
you use exclusively for business purposes on a continuing basis.
This means more than occasional or incidental use.
IS IT YOUR PRINCIPAL PLACE OF BUSINESS?
Your home will be your principal place of business if you use
it exclusively and regularly for the administrative or management
activities of your trade or business and you have no other fixed
location where those activities are conducted.
"Administrative or management activities" include activities
such as billing customers, keeping books and records, ordering
supplies, setting up appointments, forwarding orders or writing
reports.
Furthermore, and this is a recent change in the law from 1999
onwards, even if certain administrative or management activities
are performed outside your home, you will not necessarily be
disqualified from satisfying the principal place of business test.
You may, for example, engage third parties to conduct your
administrative or management activities at other locations. An
outside bookkeeping service is one example. You may also
conduct some of your management or administrative activities
from your car on your cellphone without disqualifying your home
as your principal place of business.
Alternatively, if you conduct your business at more than one
location, whether your home can be considered your principal
place of business depends on a consideration of the relative
importance of the activities performed at each location. If this
is not determinative, you can then take into account the time
spent at each respective location.
If, after conducting this analysis, you home can be identified
as your principal place of business then, provided you also
satisfy the trade or business and exclusive and regular use
tests, you can deduct home office expenses.
IF NOT PRINCIPAL PLACE OF BUSINESS, DO YOU MEET
PATIENTS, CLIENTS OR CUSTOMERS IN YOUR HOME?
Even if you can't meet the principal place of business test,
if you use your home to meet with patients, clients or
customers in the normal course of your business, you may
still be able to claim the deduction.
You can deduct expenses for the part of your home used
exclusively and regularly for business if you physically meet
with patients, clients or customers in your home and their
use of your home is "substantial and integral" to the conduct
of your business.
This means that the use of your home for occasional
meetings and telephone calls is not sufficient as the use of
your home is not substantial and integral to your business.
IS IT A SEPARATE STRUCTURE?
You may deduct expenses for a separate free-standing structure
such as a garage if you use it exclusively and regularly for your
business. It does not have to be your principal place of business
or a place where you meet patients, clients or customers.
For example, if you're an internet consultant whose principal place
of business is at an office downtown, but you also use your garage
exclusively and regularly as your home office for reviewing client
websites and writing reports in relation thereto, you can claim the
home office deduction for expenses associated with your garage.
BRINGING IT ALL TOGETHER
To summarize, then, to qualify to deduct expenses for the business
use of your home, you must satisfy the following tests:
1. Your use of the business part of your home must be:
(a) exclusive (unless the storage of inventory or day-care
facility exceptions apply); AND
(b) regular; AND
(c) for trade or business
AND
2. The business part of your home must be one of the
following:
(a) your principal place of business; OR
(b) a place where you meet with patients, clients or customers
as a substantial and integral part of your business; OR
(c) a separate structure such as a detached garage you use in
connection with your business.
CALCULATING YOUR BUSINESS USE
Calculating your business use of the area of your home that
you are using exclusively and regularly for business purposes
is not complicated. First, calculate the percentage of the business
area of your home as a proportion of your total home area.
Next, add up your rent or mortgage interest, utilities, repairs and
maintenance, insurance and property taxes. Finally, multiply the
total by the percentage you calculated above. If you own your
home, you can also include depreciation on the business
portion of your home.
Note though that you cannot deduct your home office if you have
a loss from your business or if you would create a loss by
claiming the deduction. If you find yourself in this situation, never
fear. Any expenses you can't claim this year can be carried forward
to future years.
WHETHER TO CLAIM THE HOME OFFICE DEDUCTION
So, that's the home office deduction in a nutshell. Not too
difficult, is it? Should you claim it? Why or why not?
To help you answer these questions, let's wrap up with a quick
look at the pros and cons of claiming the home office deduction.
First, the big con. Claiming the home office deduction increases
your chances of being audited. So, be sure that your claim
is legitimate before you claim it because the odds are relatively
higher that the IRS will come knocking on your door. Don't let
that stop you if you have a legitimate claim that's worth claiming
though as there are some significant advantages in claiming your
home office even after you consider the fact that your mortgage
interest and real estate taxes are already tax deductible.
To begin with, deducting as business expenses what would
otherwise be personal expenses reduces not only your income
tax but also your self-employment tax. Next, if you claim for a
home office, you can deduct rent, utilities, insurance and
depreciation which you couldn't otherwise take as expenses.
Finally, a home office allows you to deduct more car expenses
because it allows you to claim the miles you drive from home
to your first business stop of the day and from your last stop
of the day back home. This would otherwise be undeductible
commuting mileage.
Tax law is not a favorite subject of many people, I hazard to
guess. But, dry and brain numbing as it is, strive to have at
least a working knowledge of the fundamentals. This can help
you structure your business from the outset in a way that allows
you to take maximum advantage of the tax laws that work in
your favor and to minimize those that may work against you if
you don't plan your tax affairs effectively. A good accountant is
your best ally when it comes to tax. This article has hopefully
given you a working knowledge of the fundamentals of the home
office deduction but consult your accountant as to your own
particular circumstances.
------
** Reprinting of this article is welcome! **
This article may be freely reproduced provided that: (1) you
use the autoresponder copy which contains a resource box;
and (2) you leave the resource box intact. To receive a copy
of this article by autoresponder, just send a blank email to
mailto:homeofficetax@ahbbo.com .
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4.
=> Tip #1: How to get programs out of the startup folder
Some programs tell Windows to launch them at start-up by
placing a shortcut in the StartUp folder. To remove start-up
programs, right-click on the Start button and select Open.
Double-click on the Programs folder, then the StartUp folder.
Delete shortcuts to programs you don't want to run at start-up.
Or just drag the shortcut out to the Desktop to temporarily
remove it from the StartUp folder. You can drag it back later
or delete it.
=> Tip #2: How to quickly change items on your start menu
An easy way to make a change to items you've placed in
the Start menu is to right-click on the Start button and choose
Explore. A dual-pane Explorer view will open, letting you
navigate through the directory tree in the left pane and open
the contents of the folder you want in the right pane. To
produce the same view for a folder, you can either right-click
on the folder and choose Explore, or hold down the Shift key
and double-click.
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5.
http://www.equine-online.net
Gail Kingswell Trueman writes:
"Hello Elena
"I am a relatively new webmaster based in the UK. I have an
equestrian information website which also has a members club.
"Members can get a free email address, ask equine related
questions, view and contribute to the funstuff, find information on
horses and riding from beginner level to advanced, including
professional horse sports, and receive the newsletter. I currently
have about 100 members and receive about 30 hits a day. I
haven’t registered with any search engines yet, except for
YAHOO and I am listed with Yahoo but only seem to appear on
a search for the title of my site or something similar. I don’t think
Yahoo is generating any traffic for me at a result and my traffic is
coming from offline UK horse magazine advertising. I would like
to expand my visitor base to further afield and wonder what your
advice would be. My website address is
http://www.equine-online.net .
Regards
Gail Kingswell Trueman
Webmaster
http://www.equine-online.net"
I found Gail's site striking for its technical "togetherness" and
intelligent navigation. It doesn't matter what page you're on, you
can see very clearly, through clever use of color, where you are
and where else there is to go. This is an example of a very
professionally designed site (whether created by a professional
webdesigner or not, I don't know and it doesn't matter). Notice
the extensive, consistent use of alt-tags (the tag that comes up
when the cursor is positioned over an object) and the use of
color against the black background. In my experience, the
extensive use of black backgrounds all too often leaves a tacky
impression, kind of like those paintings of Elvis on black velvet.
This is one of the few sites I have seen that uses this dramatic
background to good effect.
As far as generating traffic, Gail is targeting a very specific,
targeted audience. This will always be a challenge for her in
terms of generating large numbers of site visitors but, on the other
hand, such an audience is generally a better one for advertisers
than a more general, diluted pool of potential prospects. This very
narrow target audience should also work well for Gail in having her
site listed high in the search engines. She simply shouldn't have
all that much competition provided she chooses her key words
carefully. Time would be well-spent carefully researching the kinds
of keywords visitors interested in her site could be expected to
enter.
Once submissions to the search engines are completed, Gail
should then submit her site to all relevant directories she can
find. A good place to find a centralized listing of website directories
is Virtual Promote at http://www.virtualpromote.com . Finally,
reciprocal linking with complementary but not competitive websites
is another way for Gail to generate traffic to her site.
Gail is already publishing a newsletter which is the other thing I
would have suggested she do.
Very nicely done, Gail.
------
If you want your site seen by thousands, write and tell me
about it! But make sure it's one you've created yourself
or have had created especially for you. No self-replicating affiliate
sites please.
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7. Advertise in A Home-Based Business Online
A zero tolerance policy applies at AHBBO in relation to
undeliverable mail. This means that the recipient address
for emails returned "undeliverable" (including where the
recipient's mailbox is full) is automatically deleted from
the AHBBO subscriber database.
This policy has been introduced to more accurately reflect,
in the subscriber numbers, the number of eyes who will
actually see your ad. Because AHBBO classified ad rates
are calculated on a $CPM basis, this policy is intended to
maximize the return on your advertising dollar.
Current ad rates, subscription numbers and placement details
are at http://www.ahbbo.com/advertising.html . Choose from
sponsor ads, single ad placements, Ad Paks (4 ads for the
price of 3), Super Ad Paks (8 ads for the price of 5) and
exclusive mailings.
8. Subscription Management
Please note: email addresses for ALL returned mails are
automatically deleted from the AHBBO subscriber database.
If you have a free email account and want to continue
receiving this ezine, please make sure you clear out your
mailbox on a regular basis!
To SUBSCRIBE to this Newsletter
mailto:subscribers@fawkner.com?subject=subscribe
To UNSUBSCRIBE from this Newsletter
mailto:subscribers@fawkner.com?subject=unsubscribe
(Processing of unsubscriptions is automated. Please make
sure that your email is sent from the account you subscribed
with otherwise you will not be unsubscribed. If you've tried
to unsubscribe but keep receiving AHBBO, please make
sure you've tried to unsubscribe with the address you
subscribed with before contacting me.)
To CHANGE your Subscription Address
mailto:subscribers@fawkner.com?subject=change_address
and in the body of the email tell me what your old address
was and what it needs to be changed to.
If you find this newsletter valuable, please forward it
in its entirety to your friends, family and associates!
9. Caveat Emptor
Although all of the information presented in AHBBO is
published in good faith, neither the publisher nor the
editor accept any responsibility as to the accuracy or
otherwise of the information presented. By making use of the
information contained in AHBBO the reader assumes all risk
that certain information may prove to be incorrect.
All advertisements are accepted in good faith. However,
advertisers are solely responsible for the content and
accuracy of their classified advertisements and no
warranties are given, nor responsibility accepted, by the
editor or the publisher in relation to any classified
advertisement appearing in this publication. ALWAYS carry
out your own due diligence!
10. Contact Information
Elena Fawkner, Editor
A Home-Based Business Online
Contact By Email
http://www.ahbbo.com
All Rights Reserved