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 ignore the cost of doing business. Valid expenses include professional travel, office supplies, shipping fees, professional memberships, subscriptions, and computing equipment. Take care to maintain accurate records of these costs including relevant 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. Create a plan for your retirement: A self-employed retirement plan, or SEP IRA, should be considered not only for tax reasons, but to build a retirement fund as well. A Keogh plan option allows more tax-deferred money, but is only available if you have at least $2,000 to start. Other plans are available using as little as $100 to start.
6. Hire your family members: You may subtract medical expenses for the whole family if you hire them legitimately.
7. If you must, defer earnings: When you are self-employed, you are permitted to slightly change your billing so that you can postpone income if you discover you are in a higher 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. Before the end of the tax year on December 31st you may need to increase your business expenses to offset your tax deductions. Buy a few business items that you know you will need for the months to come. This is a good option if you find your income has advanced you to the next tax bracket. This is one of ways to lower your tax burden for the year.
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.
