Two young Girl Scouts in Hazelwood, Missouri were selling Girl Scout cookies on their front lawn (as reported by CBS St. Louis). The neighbors complained to the city about the traffic and noise (the sales must have been good!).  The city said the girls were in violation of a city ordinance against selling products from home.

It seems pretty harsh to penalize two little girls.  But, on the other hand, Girl Scouts are supposed to be good citizens and obey the laws.  Should there be an exception to local ordinances for Girl Scout cookie sales?

And wait a minute.  Aren't Girl Scouts supposed to sell cookies to friends and families, and not in front of their homes?  Why can't they sell in front of a local grocery or Wal-Mart, as I saw here in our community? I'm guessing the national Girl Scout organization didn't sanction this home-based sale.

Before You Sell From Home, Check Local Ordinances and Zoning Restrictions

My point here is to remind you to check local ordinances before starting a home business.  Visit city hall and talk to the licensing person and the zoning board to find out the zoning restrictions on home businesses.  It would be shame if you opened a business and then found out you couldn't operate from home.

How to Find Information on Local Ordinances

Check on Local Licenses and Permits for Business Startup

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You still have plenty of time to file your business tax return, but you may be considering filing an extension application.  Here are some common questions about tax extensions.

I don't owe any taxes. Do I have to file by the tax due date?

The IRS says that even if you don't owe income taxes, you must still file your small business and personal tax return by the due date (April 18 in 2011).  You can file an extension by April 18 if you will not be able to complete your tax return by the due date.

If I don't get my taxes filed by the first extension due date, can I file a second one?

No. You only get one six-month extension.  Remember, you must pay your taxes due by the original due date.

Do I have to provide a reason for requesting an extension of time to file my business taxes?

Nope. You can just file the extension. The approval is automatic. But the IRS does reject extensions if they find errors or if the taxpayer information doesn't match their records.

How do I file for an extension with my state? Does the federal extension application count for my state as well?

Each state that requires income taxes handles extensions differently.  Check with your state's taxing authority (state department of revenue or other similar title) to learn about the process for filing an extension for a state tax return.  Or ask your tax preparer, or check your tax software, if you have the state version.

I will be on vacation on April 18. Can I file the extension when I return?

File the extension application before you leave.  The deadline for the extension application is the tax return due date. The only exception to this requirement is for people who are not in the U.S. on April 15, but being on vacation doesn't count. (See IRS Publication 54 for more information.)

I need an extension on a corporate tax return.  Is the filing the same as for personal returns?

The request for extension for corporate tax returns is Form 7004 and the extension is for six months, but don't forget that December 31 year end corporate tax returns are due March 15, so the six months ends September 15, 2011.

More information on Filing an Extension for Your Business Taxes

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Can I Deduct Part of My Home for Business Use?

If you want to deduct part of your home as a business expense, your use of that area must be "regular and exclusive." And that means EXCLUSIVE - for no other purpose. A recent Tax Court case points out how detailed the Court gets in determining deductibility.  The IRS says that "any personal use of a room or segregated area will preclude its use in computing depreciation or other...expenditures...." That means "ANY." In some cases the Court has allowed a deduction for use of a room or space if the personal use was "de minimis" (too small to count).  But what's de minimis?

Case in Point:

In this case, the business owner claimed that 70-71 percent of the home was used only for business. That would mean, the Court noted, that the family only used a few bedrooms and the kitchen.  The Court found it hard to believe this assertion so they went room-by-room through the house (not in person) to establish deductibility..

The business owner claimed that his use of the other rooms was only "minimal."  For example, he said that the living room was used 95 percent of the time, and that he listed 95% because someone could have walked through the living room on their way to another room. The Court did allow this "walk-through" area as exclusive use by the business because the use was de minimis - very minimal.

But another area of the home was not allowed because the taxpayer conceded that it was used one or two times a year for visiting family. For example, the dining room was used once or twice a year for family dinners.  This use is not de minimis; even a use of an area of your home a couple of times a year disqualifies it from being deductible as a business expense.

Bottom Line: If you want to deduct an area of your home on your business tax return, make sure you don't use it EVER.  Even a personal use once a year can disqualify it. The Tax Court decision is interesting reading: Source: T.C. Memo 2011-1 (Rayden) Or you can find more details about this case on the AronsonBlogs site.

More about Your Home Based Business and Taxes

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