Has your friend, neighbor or colleague told you that if you take the home office deduction, it will be a “red flag” to the IRS that will trigger an audit?  Well, that is just not true!

In order to claim the home office deduction, you MUST QUALIFY.  To qualify, you are required to meet 2 tests: regularly used and exclusively used for business.

Regular Use:  this test is clear – you use the area on a continuing basis.  Occasional or incidental business use does not meet the test.

Exclusive Use:  a specific part of a taxpayer’s home is used for business only.  There is no requirement that the business portion of a room be physically separated by a wall or partition.  But, any personal use of the space, no matter how small, means that it is not exclusive.  There are two exceptions: storage space and daycare facility.

You can have several offices.  The key issue is to determine your PRINCIPAL PLACE OF BUSINESS.
Your home can qualify as a principal place of business if:

• The office is used regularly and exclusively for administrative or management activities (billing clients, keeping books, ordering supplies, setting appointments, writing reports)
• There is no other fixed location where the taxpayer conducts these activities

A business use of the home deduction is allowed if the taxpayer meets clients in their home.  For example, if an attorney works 4 days a week in his downtown office and 1 day at his home office, he can deduct the home office if he meets with his clients there too.  It will qualify for the deduction even though it is not the principal place of business.

The best thing about qualifying your home as the principal place of business is that the miles that you drive from your home to the first business stop is now deductible.  If your home is not the principal place of business, your first stop is considered commuting and not deductible.

The easiest way to determine the business percentage is to take the total square footage exclusively and regularly used for business and divide that by the total square footage of your home.  Then, you can deduct the following categories on your return for the business percentage:

• Mortgage interest
• Rent
• Property taxes
• Utilities (gas, electricity, garbage)
• House insurance
• Security system
• Home maintenance/repairs
• Depreciation (straight line method over 39 years)

Note: Lawn care/landscaping expenses are not deductible according to the IRS regulations.  However, the Tax Court allowed the deduction where the taxpayer’s clients regularly visited the taxpayer’s home office and where the taxpayer was a daycare provider and the children used the lawn as a play area.

If you painted the office area only, that cost would be 100% deductible.  This is called direct expenses.  However, if you paid for garbage for the home, only the business percentage used is deductible which is called indirect expenses.

If your total income is less than your total expenses, your home office deduction for certain expenses will be limited.  However, these deductions can carry over the next year.  Be aware of that carry over number if this happens in your situation.

If you take depreciation on your home office and you sell your home, you have to “recapture that amount”.  What this means is that the amount you deducted for depreciation reduces your ordinary income – this is good.  But when you sell your home, that amount will increase your capital gains.  The capital gains rate is typically less than your personal income tax bracket.

Years ago, many tax preparers would never take the home office on an LLC, S-corp or C-corp return.  If they did, it would be a Schedule A deduction as an employee, which is not a great deduction due to the 2% limitations.  However, now some preparers are taking the home office for these entities.  The only thing I recommend is not to take mortgage interest or real estate taxes.  Only take the business portion of rent, utilities and insurance.

When you know the rules, there should be no fear around taking a deduction that you qualify for.  So…do you qualify?  If so, take the deduction, reduce your taxes and don’t worry about that “red flag” because if audited, there will be no change on your return because you know the rules!

Consult your tax preparer to confirm your specific situation qualifies!

By: Renee Daggett

In 2010, I got a coach, two actually. And it’s been a great benefit to my business and my sanity.

One of my coaches is a benefit of being WIC’s president: a WIC member donates her coaching services to support me during my tenure. She holds me accountable, provides feedback, and is a wonderful sounding board for different ideas. Would I’ve been a good president without her? I’d like to think so. Am I a better president because I’m working with her? Most definitely! Thanks Angel (Rampy)!

My other coach, Kate Purmal, does 1:1 coaching, but she also does group coaching. That’s the approach I’m taking, and I LOVE it!
Coaching Isn’t Just for the Stuck, Overwhelmed, or Uncertain
Many people I know think a coach is needed when progress has stalled. Quite the contrary.

The more driven and successful you are, the more important a coach becomes. It gives you perspective, helps you focus, and keeps you grounded so your engine doesn’t run empty and you perform better, stronger, faster. Yes, I watched The Six Million Dollar Man—and The Bionic Women, too.

And I can’t underscore how important that perspective is. Invaluable.  While most business owners are driven, we’re not always good at taking a step back and assessing priorities, celebrating successes, and letting go of perceived failures.

Driven business owners also juggle many balls – and are often quite adept at it. A coach helps you realize which balls are worth juggling and which are “that bottom 20 percent.”

And don’t underestimate the value of being grounded. The greater your awareness is, the better your decisions, your health, and your happiness are.
Group Coaching Is a Double Bonus
I love my 1:1 sessions with Kate. I walk away with great ideas and spot-on insight. But I’ve come to really treasure the group coaching sessions every other week.

The women in my group are amazingly smart, successful, talented, funny, and nice. Not only do I benefit from Kate’s guidance, but I also learn from my fellow “Purmalites” and absorb that wonderful energy every meeting, leaving invigorated.

Here are the insanely successful women with whom I have the privilege to spend my Thursday coaching sessions with:

• Kacey Fitzpatrick, an award-winning builder of beautiful, sustainable homes
• Jenn White Topliff, a “kick-ass” graphic designer who specializes in paper invites
• Rose Faler, a go-get-‘em account director who works magic with tradeshows
• Barbara Rice, a marketer focused on breakout product launches, and contributing author to 42 Rules of Product Management
• Alison Macondray, a content strategist specializing in way-cool Prezi-based presentations
• Karilee Wirthlin, a website strategist, former WIC president, and one of San Jose Business Journal’s “40 under 40”

So what say you? Have you tried coaching? What did you think? Thumbs up or down? Why?

By: Avery Horzewski

“Earth people do this every day, so why to bother?” asks Jumba.

“Because if everyone gave up, nothing would get done,” answers Lilo.

Who says you can’t learn anything from cartoons? While brushing my daughter’s hair this morning, Lilo’s wisdom floated into my consciousness, compelling me to write a blog post that was already on my to do list.

Just yesterday, the latest quote on my Women’s Advantage calendar read “Success is a result of diligence, not just intelligence.” (Brenda Nixon) Upon seeing the quote, I thought, “true—but it’s also a matter of perseverance. That would make a nice blog post.” And I promptly added it to my blogging idea list…where it probably would have lingered if it wasn’t for Lilo reminding me of its importance.
The Power of Perseverance
Consulting is a hard gig. It’s not for everyone. Don’t get me wrong. I love consulting—it suits my personality better than a corporate gig—but you have to have a “stick-to-it, go-get-‘em, in-it-for-the-long-haul” attitude to be successful and happy.

There’s no guaranteed paycheck (okay, so in today’s economy, that’s true for every career, but you know what I mean). You have to sell yourself (harder to do when you’re socialized not to brag). Not only do you have to keep up on the latest-and-greatest in your field, you need to be ahead of it. You’re often wearing a lot of hats (although you should offload as many of those as possible). You get the idea—and if you’re a consultant reading this, you’ve probably been nodding your head the whole time, going “yeah, yeah.”

So to be successful as a consultant, you need intelligence, yes. You need diligence—if you’re not thorough, attentive, meticulous, etc., you’re likely to have some very unhappy clients. And you may be equally unhappy with the projects/clients you take on as a result.

But…if you don’t have resolve and determination—the Big P—you’re missing a key component that will help you get through the challenges that are a natural part of running your own business.

The “Big P” is what allowed “The Little Engine that Could” to make it over the hill. He had perseverance in train loads. (Another example of how motherhood helps you in business.) And perseverance is what will help you thrive as a consultant. Actually, it will help everyone, but this is a blog for consultants and small business owners.

So, to slightly revise Brenda Nixon’s quote: “Success is a result of diligence and perseverance, not just intelligence.”

What are some of your favorite “ence” words? Confidence and eloquence are two of mine.

By: Avery Horzewski

I just finished reading an interesting post on Copyblogger by Sonia Simone. I love people who aren’t afraid to question the status quo or express an opposing viewpoint to acceptable practices. I love it even when I don’t agree with them, because it keeps the conversation going, ensures we don’t get complacent, and pushes us to explore all the avenues.

The mantra in social media is to invite feedback, engage in conversation. Sonia isn’t advocating ignoring comments. Rather, she suggests we should:

• Focus on where we want to go
• Develop a “red velvet rope policy”
• Ask ourselves “Is this person my customer?” whenever we receive a negative remark.

It’s an article worth the read.

“Are You Getting Dangerous Feedback from Your Readers and Prospects”

By: Avery Horzewski

As I mentioned in my last post, Work-Life Balance: Finding Inner Peace Despite External Turmoil, Simma Lieberman shared many pearls of wisdom at the last Women in Consulting (WIC) meeting. As I was going through the business cards from that meeting, I came across Simma’s. On it was eight steps to stress management. I thought I’d share them with you. Make sure to check out her site and blog for more stress management and work-life balance advice.

1. Breathe. Remember to breathe. Start each day with five minutes of deep breathing. Take five deep breaths when feeling stressed or anxious.
   Me: the key is to remember; maybe I should add it to Outlook, following step # 6.
2. Visualize. Stop negative/obsessive thoughts by visualizing a positive scene, e.g., the beach, mountains, fishing.
   Me: right now, bed with at least eight hours of uninterrupted sleep is a positive scene for me.  
3. Process. Decide when you can control, and take action. Change the things you can. Learn to let go of the things you can’t control.
   Me: I go, I go, I’m going to learn to let go. This is a new mantra I’m going to work on following. It’s that one-step-at-a-time thing I referenced in my last post. I’m sure I will fall at times, but like the toddler learning to walk, I’ll just get up and keep going.
4. Stop worrying. Change destructive self-talk to constructive self-talk.
   Me: Whew! At least one of these is easy for me. I tend not to be worrier. I find it a waste of energy. But for those times when I do worry, I’ll change the destructive tapes.
5. Schedule. Put yourself on the calendar for fun and relaxation. If you don’t write it in, it won’t happen.
   Me: I’m scheduling a massage first thing tomorrow morning — once it’s a reasonable time to call! Actually, I like this one, as it’s not uncommon for me to let this go. I’m also going to figure out another time to workout besides 5:30am, as it’s not ideal when I’m getting to bed late due to work. Plus, it’s not my favorite time. I feel better when I work out. It helps me relax. It reduces stress.
6. Support. You don’t have to do it alone.  Create a support system of friends.
   Me: this is where WIC is great. All of my WIC colleagues understand better than anyone what I’m going through when it comes to work stresses and work-life balance.
7. Accept. You’ll never be totally caught up in your work. If you were, they wouldn’t need you.
   Me: okay, I’ll accept it. I guess I have to let go of that day dream. As a consultant, I definitely want to be needed!
8. Breathe. Remember to breath!! End each day with at least five minutes of deep breathing.
   Me: I’m off to breath!

By: Avery Horzewski

Last Thursday, at the Women in Consulting (WIC) meeting at Michael’s at Shoreline, I had the pleasure of listening to speaker Simma Lieberman discuss work-life balance for consultants. Given all that’s happening in my life, this was a timely topic indeed — one that I was looking forward to with great anticipation. I was not disappointed.

Simma (www.simmalieberman.com) shared many pearls of wisdom that evening. One that really struck a chord was the idea that real balance comes from achieving an inner peace regardless of what’s going on in your life.

Sure, I’d heard it before — but you can never hear it enough. It’s true. It’s not easy (for most of us anyway). It takes a conscious effort. And it starts with paying attention to the negative tapes that are part of our everyday dialogue; that are our automatic response to life experiences — especially stressful ones.

This appeals to me because, for the most part, I can’t control what happens around me. And if what’s happening around me is seriously stressing me out, I’d sure love to be able to control or influence something. And my response is the only thing I can control. Doing so may even influence all the “stuff” happening around me. BUT…how do I control those pesky thoughts? The same way I learned to walk — one step at a time.

Taking It One Step at a Time

The thoughts that follow didn’t come from Simma in this exact form. Some she specifically said. Some I’m inferring. And some have come from other readings. But, they’re all first steps that we can take towards inner peace.

• Be aware of your thoughts and stop negative statements in their tracks.
• Rephrase your response (even if it’s just an internal conversation); come up with an alternative possibility or explanation or statement.
• Cultivate a spirit of thankfulness.

Understanding the Power of Gratitude

I’m a big believer that our thoughts can help manifest our realities; it’s been shown in medicine a lot of times. Cultivating a spirit of thankfulness is a good example of that. I was thinking about it a lot over the past couple of days and then in my inbox today appears an email about a new book, Learning to Dance in the Rain: The Power of Gratitude by Mac Anderson and BJ Gallagher. You can preview the book at http://www.simpletruths.com/flash_files/ibDITR/ibDITR.html if interested. (NOTE: I’m in no way related to this book, nor do I benefit from the sale of it.)

Here are a couple of key things from the book and a short video about a companion poem, “Weather Report” by BJ Gallagher (http://www.danceintherainmovie.com/) that underscore the concept of changing your thought patterns:

• “Life is not about waiting for the storm to pass. It’s about learning to dance in the rain!” Vivian Green
• “Gratitude unlocks the fullness of life. It turns what we have into enough, and more. It turns denial into acceptance, chaos to order, confusion to clarity. It can turn a meal into a feast, a house into a home, a stranger into a friend. Gratitude makes sense of our past, brings peace for today, and creates a vision for tomorrow.” Melody Beattie

Some would say that it’s pretty stormy for many consultants right now. Waiting for it to pass isn’t going to make it better. As Gallagher writes, “we all face adversity in our life. It’s not the adversity, but how we react to it that will determine the joy and happiness in our lives.” According to the recent WIC Compensation Survey, many consultants are adopting this positive mindset, such as “I decided to opt out of the recession. My attitude has kept my business growing and moving forward.”

For those of us who are fortunate to be busy with work while trying to juggle parenthood, aging parents, family health issues, and/or other daily life experiences, we face another set of challenges. I fall into that group. And I choose to be thankful.

When I’m working until midnight for weeks on end, instead of bemoaning my fate, I’m thankful that I have work.

When I have a day where I’m constantly moving between consultant and mom with barely a moment to rest, I’m thankful and honored to have such a beautiful, special daughter who loves me unconditionally and keeps me in the moment at least some of the time.

And when I’m faced with the challenges of running a consulting business that require me to wear multiple hats and sometimes deal with stressful situations, I’m grateful for WIC and all the support, insights, and friendships it offers. It would be impossible to maintain the success that I’m experiencing — not to mention my sanity — without this wonderful organization.

By: Avery Horzewski

I just read a great article in the Wall Street Journal in the Small Business section: In Recession Specials, Small Firms Revise Pricing.

While the article focuses on small businesses other than consulting, its core message is worth noting if you find your client pool drying up during the current economic client.

Be creative. Be flexible. Be open (to new ideas). These are the ideas that I take away from this article, which are good to remember even when times aren’t tough.

By: Avery Horzewski

Okay, I admitted in a previous post on Nine Twitter Tips for Business that I’m not someone who follows everyone who follows me because it’s the polite thing to do. So of course, I would find this nice little post on the TerraFarm blog to my liking.

Here are Tom’s top 10, all of which are worth keeping in mind as you start to Tweet:

1. Your picture hasn’t been set.
2. Your name is comprised of works like money, cash, free, sex….
3. You auto-DM me when I follow you.
4. Your Tweets are full of foul language.
5. You constantly lash out at me or others.
6. You constantly push your own product, service or blog, and tweet about nothing else
7. You’re never positive. Ever.
8. Your bio is empty and you live “nowhere.”
9. You haven’t Tweeted in months.
10. You are never “live.”

Read the full “10 Reasons to Unfollow/Not Follow Someone on Twitter” article

By: Avery Horzewski

Jason Snell of Macworld.com wrote a nice overview on nine ways to use Twitter for business. It’s a great introduction for those who are unsure how Twitter can be used for business.

I agree with everything he says for the most part, with the caveat that you should assess any recommendations in light of your own audience, as well as what makes sense for your business. Consumer companies will have different needs from business-to-business companies who will have different needs from consultants and so on. The key is to view Twitter as a tool and not all tools work for all people.

The one recommendation I disagree with in part is “# 3: Follow people who are relevant…it’s polite to follow people. And by following people you are creating an ecosystem — people will see who you are following and consider those as suggestions for users they should follow as well.”

Yes, you should follow relevant people. And it may be polite to follow someone who follows you, but is it in your best interest to follow everyone who follows you? No is my philosophy. Follow people who make sense for you to follow.  For example, I won’t follow people who: 

• Never Tweet anything of interest to me
• Neglect to provide a bio and/or a link to more information about them
• Are only interested in selling me “stuff”
• Bombard followers with a plethora of Tweets daily – there are people who post 30 or more times in a day; and that’s way more than I want to here from anyone person

These are some of my personal guidelines for following people. They’re based on my reasons for using Twitter. I view Twitter as an information resource. So for me, it’s about sharing and receiving information.

Here are the high-level tips:

• Don’t automate it
• Be conversational
• Follow people who are relevant
• Make sure your people are on Twitter, and refer to them
• Answer your mentions
• Search for your name
• Consider creating sub-accounts for sections of your business or customer base
• Use Twitter to ask your customers questions…and get good answers
• Be a good Twitter citizen

Read the full “Nine Twitter Tips for Business” article

By: Avery Horzewski

For those of you managing a WordPress blog but aren’t backing up your site, Christopher Penn posted a nice article on how to back up your WordPress blog in 60 seconds. When reading the article, make sure to read the couple of comments at the end that refer to also backing up database files (pasted below, too) 

“Yeah… I use a plug-in that automatically backs up the whole database and emails it to me. Daily. I save a month’s worth of backups so if something goes ugly or gets hacked, I can walk it back to when it WORKED.”

“Please be aware, though, that the WP export function only backs up internal-to-WordPress portions of your database. If you use plug-ins that store information in DB fields (such as PodPress), this will not keep that data safe. For that, I suggest you use WP-DB-Backup.”

Read the full “How to Back Up Your WordPress Blog in 60 Seconds” article

By: Avery Horzewski