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Many professionals have decided to become self-employed since they have such great new technology to help them along. There is the internet and web conference calls that make working for yourself a great idea as a full-time endeavor. Many people are making careers for themselves at home, working the hours they desire and reaping a great income. Being self-employed does have its own set of problems and concerns, one of which is taxes. Read on for 10 tax ideas to help lower taxes for self-employed people:
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 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. Don't overlook business expenses: Office supplies, shipping fees and postage, newspaper and magazine subscription costs, professional membership dues, and other business related items including computer upgrades and software should be thoroughly maintained. Any expenses accrued while traveling for business would also be included. Be sure to keep all receipts.
4. Deduct expenses for child care: Don't forget to take deductions for childcare services provided while you work. It is easy to neglect these deductions, but they can add up to a lot of money.
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 your family members: You may subtract medical expenses for the whole family if you hire them legitimately.
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 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.
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 How to save a bundle when filing business taxes
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