Fortunately for the virtual corporation owner who works

Fortunately for the virtual corporation owner who works from home, there are a number of deductions you can claim throughout the business year to ease the tax burden. The most common of these are:
* Office space: If you operate your business from a home office, you can deduct a portion of your rent or mortgage payments, utility bills, insurance costs, property taxes, and even improvements to your property from your income tax. You will have to determine what percentage of your home is used "exclusively for business" (this is the percentage of physical space your home office takes up, which the IRS allows for as much as 25 percent). You can then deduct that percentage of your home bills from your tax returns and pay far less.
* Equipment and supplies: The IRS allows business deductions for all equipment and supplies related to your business use. This can include your computer, your desk and chair, any of the furnishings in your home office, office supplies such as printer cartridges and letterhead, your internet service provider, and even your vehicle-as long as you use it for business-related purposes, such as to drive to the office supply store and pick up printer cartridges. Major equipment like cars and computers can only be deducted once. Replenishable supplies should be kept track of and tallied up each year.
* Driving and travel expenses: Again, if you use your personal vehicle for company business, you can claim deductions on your income tax. Other than the one-time equipment deduction, you can claim a portion of your gas usage, insurance payments and repair bills. To figure out your travel deductions, you can either determine the amount of money you spent on gas actually used for business-related driving, or keep track of your business mileage and use the standard IRS per-mile deduction rate listed on the IRS web site.
* Retirement plans: Retirement plans are not only a great idea for the owner of a virtual corporation; they're tax deductible! Most funds put into a retirement plan are tax-deferred, meaning you do not pay taxes on it until you withdraw from the policy. Retirement plans will be discussed further in the following sections.

If your business loses money in the first few years-and many do before they become profitable-you can file a loss claim with the IRS and avoid paying income tax for the year; and you may even qualify for a refund.

Why You Need a (Virtual) Accountant

You may be tempted to handle all of these tax concerns and legal hoops on your own. However, if you and you alone are running your business, you may want to consider developing a relationship with a professional accountant-or at least investing in some professional-grade accounting software.

Why pay money for something you can handle yourself (albeit with an investment in understanding the rules on your part)? The answer is twofold. First: as a business owner, your time is money. The more time you have to spend on routine yet daunting form-filling and record-keeping, the less time you will be able to spend concentrating on making your company profitable. Therefore, it makes sense to pass on some of the workload, even if it's to an automated program. And second: having your records managed professionally can save you a ton of money down the road, especially if the IRS decides to audit you, and you can't find your tax records among all the client paperwork and various projects you might have lying around the home office. Keeping your tax information separate from the daily function of your business is your best protection against tax disaster. The cost of an outside accountant or good accounting software is minimal compared to the expense and disruption of a tax audit.