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        a home based business onlinehome business ideas

        Return to AHBBO Archives

                                                  IN THIS ISSUE

        1.      Welcome and Update from Elena
        2.      Home-Based Business Idea of the Week - Website
                Design Business
        3.      Feature Article - Taxation 101: Business Or Hobby?
        4.      Tips for Newbies
        5.      This Week's Subscriber Web Site Pick
        7.      Subscription Management
        9.      Contact Information

        1.      Welcome and Update from Elena

        Hello again and a warm welcome to all the new subscribers who
        have joined us since the last issue!

        This week's home business idea comes from Steve Wood
        of Wood Interactive, LLC who runs an online website design
        business course.  He is making a special offer to AHBBO
        readers but the next course starts February 19 so you need
        to be quick.  Just follow the link in Steve's bio at the end of
        segment 2.

        This week's article is tax-related since it's that time of year
        for so many of us.  "Taxation 101: Business or Hobby" looks
        at the crucial difference for tax purposes between a business
        and a hobby and goes on to look at some of the more common
        home business deductions.

        As always, thanks for reading and I hope you enjoy this week's

        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 .

        2.      Home-Based Business Idea of the Week - Website Design

        As a website designer, you would help small businesses and
        organizations in your area obtain and maintain a website. Most
        small businesses do not yet have a website, but are probably
        thinking about it now and most likely will be looking to create
        one in the very near future. There is a great need for website
        design professionals who can create effective and affordable
        websites and guide their clients in the right direction.

        Most small business owners don't know the first thing about
        getting their business online. That's where the home-based
        website designer comes in. A large part of the job is educating
        current and potential clients on the steps and procedures - and
        they are very thankful when it is explained to them in lay-man's

        A computer degree or high technology skills and experience is
        not needed to get into this field. What is more important is that
        you have a good knowledge of your computer (you're not
        intimidated by new programs), a creative streak (not necessarily
        artistic, but you can see the difference between good and bad
        design, and you like the feeling of creating something from
        scratch), a strong motivation to run your own business, and the
        willingness and ability to learn.

        Website designers earn money by designing websites, and
        receive recurring payments from maintaining and updating
        websites, hosting websites, and providing consultation to clients.
        The business can be run on a part-time basis or full-time,
        depending on how hard you want to work and how much money
        you'd like to earn.


        This Home-Based Business Idea of the Week was provided by
        Steve Wood, who owns and operates Wood Interactive, LLC and
        its hosting division Red Hot Hosting. Steve offers an online course
        for starting a home-based website design business. Course details
        can be found by visiting:


        There are many more ideas like this at the AHBBO Home
        Business Ideas page at free home based business ideas
        with more being added all the time.

        3.      Feature Article - Taxation 101 : Business Or Hobby?

        © 2013 Elena Fawkner

        For many of us it's tax time again.  For others, tax time is
        just around the corner.  So, how was business this year?  Did
        you make a profit?  If your business is very new, most likely
        you made a loss.  Oh well, at least you can write it off, right?
        Well ... maybe.  Whether you can write off your business losses
        depends on whether your business really is a business or a
        hobby.  "Well, of course it's a business!", I hear you say.  "I
        don't put myself through this for the fun of it!".

        In this article we look, first of all, at the things you need to be
        doing in your business to make it very clear to the IRS that
        you are, indeed, running a business and not merely indulging
        in a hobby.  The reason this is so important is that although you
        have to declare and therefore pay tax on the income you make
        from a hobby, you can't write off your losses and may not even
        be able to deduct your expenses at all.  Secondly, we'll take
        a look at some of the common business tax deductions you
        should be thinking about in the context of your business.  Even
        if you didn't have your act together last year in terms of keeping
        records and receipts for all this stuff, at least you can get your
        house in order for when this year's tax return is due.

        HOBBY vs. BUSINESS

        The crucial distinction between a hobby and a business is
        whether you engage in the activity with a profit motive.  Now,
        by profit motive, we don't mean that "gee, it's really great
        that I can make money doing something I love", we mean "I'm
        doing this with the intention of making a profit and if I can't make
        a profit doing this then I'll find something else to do that will make
        me a profit".  The difference is one of motive.  In the former, the
        motive for the activity was the doing - the enjoyment inherent
        in the activity itself.  Making money was an incidental, albeit
        most welcome, benefit.  In the latter, the motive for the activity
        was to make a profit.  That's not to say that you can't enjoy
        what you choose to do to make that profit, it's just that your
        primary objective must be to make a profit such that if this
        venture is inherently unprofitable, you would presumably choose
        not to pursue it.  With a hobby, on the other hand, even if the
        activity was inherently unprofitable, it is something you would
        choose to do anyway.

        OK, so much for your own subjective intentions.  How does the
        IRS decide whether you truly have a profit motive?  There are
        two ways it goes about it.  The first is an objective test.  Quite
        simply, the IRS will look at your tax returns for the last 5 years
        and if you made a profit during at least 3 of those years, you
        will satisfy the profit-motive test.  If you don't meet this test or
        if your business is new and you haven't filed 5 tax returns, then
        the IRS will apply a subjective standard.  In applying the
        subjective standard, the IRS auditor considers and weighs
        several factors, including:

        => Businesslike Manner of Carrying On Activity

        The IRS will look at how you carry on your activity.  Do you keep
        a good set of books and records or do you chuck receipts into
        a battered shoebox?  Do you have separate bank accounts for
        your business?  Do you invest in advertising, marketing and

        => Time and Effort Invested

        Is your business a sideline or something you pursue more or
        less full-time?  Obviously if you devote substantially all of your
        available time to the activity, the more likely it is that you have
        a profit motive since that is your primary source of income.
        Things can be trickier if you work full-time and your business
        is something you pursue on the side.  Just be sure you can
        demonstrate an ability to devote substantial time and effort
        to your business.  Unlike a hobby, a real business in which
        you have a profit motive demands time and effort.  It's NOT
        something you just don't get around to this week because
        "things came up".  With a hobby you can do that.  With a
        business you can't.

        => Track Record of Profit-Making Ventures

        If you have a history of involvement in profit-making activities
        in the past, this will be relevant to your ability to make a
        profit in your current venture.  Conversely, if you have no
        track record at all of involvement in profit-motivated
        pursuits, the IRS is going to be looking for evidence that
        you know what you're about and have sufficient experience
        and expertise to turn your activity into a profitable

        => Nature of Losses

        The nature of the losses you claim will also be a relevant
        consideration.  If you're a start-up, substantial first year
        losses are to be expected.  After that, however, you should
        be demonstrating a shift towards profitability.  Your second
        year may still show a loss but it should be a smaller one
        that your first and your third should be smaller again than
        that, and so on.

        => Changes in Operations

        If you continue doing things the same way, day in day out
        even when they're clearly not working to make you a profit,
        that's a strong indication that you're engaging in a hobby
        and that you don't have a profit motive.  On the other hand,
        if you can demonstrate changes in operations to attempt
        to fix what isn't working for you, this will lean towards a
        profit motive.

        => Profit Patterns

        The IRS will also be looking for profits in some years, even
        if losses occur in others.  A pattern of small profits and large
        losses every year, year in, year out will raise suspicion.

        This is just a sampling of the types of factors the IRS will
        give weight to in adjudging whether your "business" is truly
        a business or a hobby.  For more information, visit the IRS
        website at http://www.irs.gov.


        OK, now that we all have healthy profit motives and are
        therefore running serious businesses here, let's finish up with
        a quick look at some of the common business deductions
        for home-based businesses:

        => Home office deduction.  For a complete article on this
        deduction, read "Taxing Times ... The Home Office Deduction" at
        http://www.ahbbo/homeofficetax.html .

        => First year expense deduction.  You can deduct up to $20,000
        worth of equipment as a current expense during your first year of
        business with this deduction.  Otherwise, you would have to
        deduct it over a period of years depending on the depreciation
        schedules for the assets concerned.

        => Auto expenses.  If you use your car for business purposes,
        you can claim mileage or depreciation.  The mileage method allows
        you to  deduct the amount per mile the IRS allows for the particular
        year.  The depreciation method allows you to take a depreciation
        deduction on the cost of your car and add to that all costs and
        expenses associated with running your car including maintenance.

        => Health insurance payments (proportion).

        => Business insurance premiums.

        => Contributions to retirement plans.

        => Continuing education expenses related to your business.

        => Gifts valued at up to $25 per person per year.

        => Internet and email services - ISP, webhosting etc..

        => Interest on business credit.

        => Entertainment - 50% of ordinary and necessary business
        expenses for entertaining clients, employees, etc..

        => Advertising, marketing and promotion expenses.

        => Membership dues for professional associations.

        => Subscription costs for professional and trade publications.

        => Local travel expenses e.g. taxis, trains etc..

        => Business travel expenses - airfare, accommodation, meals,
        entertainment etc..

        => Postage.

        => Furniture and equipment.

        => Business cards, stationery and office supplies.

        => Parking fees.

        => Bank fees on business accounts.

        For more detailed treatment of each of these deductions, as
        well as many others, visit the IRS website at http://www.irs.gov.

        Tax time is no fun for any of us but there is no reason to
        make it any harder than it has to be.  If you keep putting off
        getting your tax return prepared because you just can't face the
        thought of going through that shoebox at the back of your
        closet to organize your receipts, make a vow that this is the
        last year you will do this to yourself.  It's still early enough in
        the year to get your act together and by this time next year
        you could be focusing on your business rather than stressing
        out about something as unnecessary as tax-time hassles.


        ** 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.

        4.      Tips for Newbies

        TIP #1: How to find out anything about your computer.

        If you aren't totally satisfied with what you know about
        your Windows 98 computer, you can easily dig deeper with
        the System Information Utility. It's built right in.
        Select Start, Run, type msinfo32.exe and click OK. Or
        select Start, Programs, Accessories, System Tools,
        System Information.

        If a hardware problem is detected, the component categories
        will show color coded messages. If a device isn't working,
        you'll see a red message stating "This Device Has a Problem"
        followed by a description of the problem. This is a great
        place to start if you're experiencing anything out of the
        ordinary with your computer.

        TIP #2: How to find out if hardware devices have gone sour.

        Is your computer's hardware causing problems? Did you install
        a new sound card that won't work? Or something else? Check
        the Device Manager for details.

        Right click My Computer, and select Properties. Click the
        Device Manager tab. If you see a yellow exclamation mark
        next to any item, it has problems. You can uninstall that
        item by highlighting it and clicking the Remove button.

        When you reboot your computer, Windows will try and locate
        the appropriate drivers for the device. You may need to
        have your Windows CD available, or the proprietary disks for
        that particular hardware. Worst case scenario: the hardware
        still doesn't work after you've tried this. You may need
        to take you computer in to a techie.


        Tips by Tom Glander and Joe Robson of The Newbie
        Club. The best Newbie Site ever to hit the Web.

        5.      This Week's Subscriber Web Site Pick - Aunt Sally's
                Custom Quilts

        Sally Bunston writes:

        "Hello Elena,

        "I've enjoyed quilting as a useful hobby for almost twenty
        years and finally opened "Aunt Sally's Custom Quilts"
        two years ago...and took it to the 'Net in August of 2013.
        It was the best move I ever made! I'm finally making a
        living at something I enjoy while working from home.

        "Initially, I offered custom machine quilting for other quilters.
        The local business has been great, but I have lots of quilts
        literally hanging around which I quilted to advertise my
        stitching abilities. The only logical option for selling these
        works of art was taking it to the Internet. So I found a local
        web designer who wanted a wildlife quilt about as bad as
        I wanted a website....and I was in business. Well, it was a
        little more intense than that..I hadn't touched a computer in
        twelve years! Let's just say I know a WHOLE lot more
        now about computers.

        "In the last few months I have worked on quilts from New
        York and California and have sold several in other states.
        Now that I'm so handy with a computer I am exploring
        Desktop Publishing as a means to print some of my original
        quilt patterns. Customers have been asking and I think I
        should listen."

        Sally Bunston
        Aunt Sally's Custom Quilts
        Charles City, IA USA
        Creating Tomorrow's Heirlooms Today


        10. Contact Information

        Elena Fawkner, Editor
        A Home-Based Business Online
        Contact By Email


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