Self Employed Tax Tips
2nd March 2012 by Tax Man No CommentsThanks to the new technology and the ease that the Internet and teleconferencing brings, this has brought about more and more people from all walks of life like coaches, contractors, professional consultants, and freelance workers to become self-employed. As of late, being self-employed does not mean a way of generating additional income to add to the current job, but as a primary income generator. Of these, there are many a full-time workers who are now making extraordinary incomes while setting their own hours of work. Nevertheless, self-employed people have very definite tax concerns. Peruse these 10 helpful tax tips to minimize the tax impact on your income.
1. It is important to have detailed record-keeping. This is a critical tax tip as without the resources of a large company to do this for you, it remains your personal responsibility to maintain the detailed records and receipts in the event that you have to document your tax deduction.
2. Space used for business can be counted as a deduction: If there is some part of your home that you only use for business purposes, for example, a basement office or an extra room being used as an office, you may deduct this percentage of the total space. You may claim this deduction as a percent of your bills such as rent or utility payments. You may also deduct business expenses from a phone bill, if you are using the phone for business calls.
3. Don’t overlook any business expenses: Keep records and receipts for all professional travel, office supplies, postal and shipping costs, software purchases, bills for computer maintenance or upgrades, dues for professional memberships, magazine or newspaper subscriptions, and any other business expenses.
4. Subtract day care costs: The IRS allows deductions for all types of childcare that may be provided during your business hours. These kinds of tax tips are often overlooked but they can save you a lot of money, so be sure to take advantage of the allowed deductions.
5. Retirement plan creation: Develop a self-employed retirement plan (that is, a SEP IRA) not only for tax purposes, but also for the purpose of creating a corpus that would serve your retirement. One can start with as low as $100, however if one has $2000 or more, one should try the Keogh plan option, which allows one to invest his money in savings for the purposes of retirement and also get the deferred tax option.
6. If you legally employ relatives, you can deduct medical expenses for the entire family.
7. Defer income if needed: You, as the boss, have the ability to alter your billing slightly so that you can defer income should you discover that you are in an elevated tax bracket.
8. Receive a refund from your FICA: You employ yourself, so you are required to submit payment for both the employee and the employer portions of Social Security taxes. You are permitted, however, to deduct one half of these payments when you file a 1040 form.
9. If needed, increase expenses: Just like you may choose to defer your income, should you find that you have a high income that pushes you to the next tax bracket, you may conduct more business purchases at the end of the year to augment some of your tax deductions before the 31st of December.
10. Locate the appropriate assistance. Ask someone who has extensive knowledge regarding self-employment issues for tax assistance since your needs are much different than that of a business organization.
Ron Finkelstein is NOT a tax attorney or an accountant. He is merely a small business operator busting his butt to earn a living, like everyone else, that’s paid a lot of cash through out the years in order to understand tax tips like self employed tax deductions and self employed software. You can benefit from his experiences by checking out his websiteat tax-deductions.info
