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Posted on March 1, 2008 by Ron Finkelstein | Posted under Taxes
Top 10 Tax Tips for the Self Employed
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1. Keep detailed records of every transaction: Large companies will employ full-time accountants to keep track of income and expense records, but as an individual taxpayer it is your responsibility to keep your records in order. Keeping a receipt on file in support of every single tax deduction you claim should be one of your highest priorities. 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 my 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. Be sure not to overlook business expenses: Maintain thorough records and keep all receipts for professional travel and other business expenses, which may include supplies for the office, postal and shipping fees, dues for professional memberships, magazine or newspaper subscriptions, and other business items, including software for your computer or technical upgrades. 4. Subtract day care costs: There are many deductions that the IRS allows for different types of childcare that are provided during the time you work. It's easy to miss this kind of tax information, but it can save you a lot of money. It's important to take advantage of the available 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. Hire within the family: If a family member is an official employee, medical expenses for the entire family can be subtracted. 7. If needed, defer income: As your own boss, you are allowed to slightly alter your billing so that you can defer income should you find you are in an elevated tax bracket. 8. Do get refunds for your FICA. Since you are self-employed, you are required to pay both portions of the Social Security Tax, employer and employee. The good news is that you may deduct 50% of your payments on the 1040 form. 9. If it is helpful, increase expenses. If you wish to augment some of your tax deductions before 31st December, you may make more business purchases at the end of the year. It will help you to defer your income if you have a high income that may push you to the next year tax bracket. 10. Try to find the right help: While taking help on tax matters go for someone who is an expert on self-employment issues since your requirements may be different from a company's needs. About The Author: Ron Finkelstein is NOT a Tax Attorney or an accountant. He is merely a small business owner who has paid a lot of money over the years to learn these Tax Tips for the Self-Employed. Check out these other 5 Small Business Tax Deductions You Don't Want To Miss and more... |
Tags: SELF EMPLOYED, SMALL BUSINESS, SOLE PROPRIETER, TAX TIPS, TAX DEDUCTIONS, TAX CREDITS, TAX HELP, TAX ADVICE
