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Elbow Room

Declare your independence and make room for business.
March 1, 1998

Is your office spilling out of the bedroom into the hall? Whether or not you're lucky enough to have an entire room in your home dedicated to your business, be sure you're making efficient use of the space you have.

Susie Sherman, owner of Professional Office Solutions Inc., an interior design business in Wood-Ridge, New Jersey, suggests:

Lynn H. Colwell is a business writer in Post Falls, Idaho.

Do Declare

If you started a homebased business in 1997 but didn't receive much income from it, you may be wondering whether it's worth the hassle to declare the business on your income taxes. Ruth Perryman, owner of ProfitAbility Management, an accounting and finance firm in San Rafael, California, says there's no question about it: "If you don't claim the income you receive from your business and you are audited, the IRS can question every deposit you've made during the year to all your accounts, both personal and business." If the IRS audits you and determines you intentionally chose not to report all your income, you can be charged with fraud. "To put it simply," says Perryman, "if you are making money, you absolutely must claim your business income."

The upside: You can also deduct business expenses. "You shouldn't be worried about an audit as long as you've prepared your taxes honestly and have documentation to back up your deductions," Perryman says. "Just keep all your receipts, canceled checks, and logs outlining auto and computer usage, and you should have no problem.

"My first year in business, I held a full-time job and still wrote off my start-up costs, which resulted in a net loss for my business, against my regular income. This made the cost of starting a home office much easier to bear."

Want to make sure you get every deduction you're entitled to? Perryman offers these tips:

Perryman warns that every situation is different; be sure to ask your accountant before applying these suggestions to your business.

Contact Sources

Professional Office Solutions Inc., (201) 507-0525,

ProfitAbility Management, 998 Las Pavadas Ave., San Rafael, CA 94903,

The Sequoia Group Inc.,