Expense Reporting and Taxes of your Company

As the economy struggles towards growth and as many Americans continue to rise above the impact of the recession, there are many who are choosing to try self employment as a back-up income plan in case their employment is severed in one way or another. There are more Americans who are running a side business or consultancy now than there have been in the past. This is good, as it opens more opportunities for employment and for creation of wealth. However, for people who have been employed all their lives, accounting and handling taxes may seem like a complex issue. A side business will have more tax implications than that of your employment - as for most part, your employer withholds all your due taxes upfront.

When reporting business incomes, the tax code allows you to deduct any expenses that you incurred for the business. This means that you can deduct some rent portion and cost of utilities relating to your home business - where you operate from while running your websites or upload your eBay sales from. You also get to pay for any purchases you make in relation to your business including purchase of periodicals, business meals subject to various qualifying rules, business travel and such related expenses and all of these things must need to declare in your expense reports.

An important rule to decision when reporting your side revenues is determining whether your incomes are from a business or a hobby. The IRS considers activity that generally brings sufficient revenues to have sustainable profits as a business. On the other hand, an activity that has high expenses but low incomes and that generates regular losses is usually categorized as a hobby. For this reason, when your business runs on losses for long periods, the IRS may audit your books and decide that the business is a hobby. You therefore, need to be careful when reporting side income activities as business.