Self-employed? Save with these 10 tax tips!
Jeff Reeves, Special For USA TODAY
The independence that comes with
being your own boss is often a double-edged sword. On one hand, it's liberating to be free of
corporate shenanigans; on the other, you're on your own figuring things out,
including taxes. Filing taxes can be a
source of dread for self-employed Americans. The trick is not to see the tax
code as bureaucracy meant to confound you, but a tool to give your business a
leg up. You can deduct a host of
expenses if you keep good records and know what to look for.
Here are ten tax tips for making
your 2013 returns less of a headache and a bit more financially advantageous:
1) Remember that you didn't pay
taxes up front: This can be a shock to first-time
filers, but self-employed workers pay no up-front taxes. While salaried workers
get paychecks with taxes already taken out, this is now up to you, since you
are your own payroll department. If you did not set aside money for the tax
man, your 2013 bill might be high. To avoid problems next year, you should
start making a plan for 2014 right now. For more about taxes and the
self-employed visit: IRS
Self-employed individuals tax center
2) Don't fear the home office
deduction: The IRS has been cracking down on
abusers in the last several years, but if you are honestly using a space for
your job, and can conform to guidelines for an exclusive-use space (as in,
don't put a bed for guests or video games for the kids in there), you shouldn't
be scared of this big-time deduction. Qualified home offices open the door to
breaks for real estate taxes, utilities, insurance and more. For more
information check out these links: Requirements
for using the home office deduction
or IRS Publication 587: Business
use of your home (PDF)
3) Don't fear vehicle and travel
deductions: It's highly unlikely you can claim
100% business use of a vehicle and write off your daily Starbucks run, but if
you keep good travel records, you have nothing to fear. For more information
see these links: Deducting business travel
expenses and IRS Publication 463: Travel,
entertainment, gift and car expenses (PDF)
4)
Supplies and professional dues: Hopefully, you also kept records for your office chair or
special design software, which are deductible, as are professional liability
insurance premiums, fees for trade associations and other charges that are the
cost of doing business in your field. Keep good records, and write them off. Also consider
subscriptions to trade or professional publications and donations to business
organizations, both of which are frequently necessary for the continuation and
growth of your business.
5) Don't forget depreciation: If you have a big fixed-asset expense such as a jackhammer
or a copying machine, you can write off part of the value each year as the
equipment ages. Get specific guidelines on how to calculate depreciation
at IRS.gov: Publication 946:
How to depreciate property (PDF)
6) Be diligent about income records: If you're a busy contractor or freelancer, it's crucial
that you keep accurate records of your income and track down relevant 1099s and
other documentation. You could get audited if the numbers don't add up or if
you miss a tax form. So make sure you check that your records are complete
before filing. For more information: Starting a business and keeping
records
7) Deduct your health insurance: If you're footing the bill for your own health insurance,
you can deduct the full cost. For more information: Health
insurance tax breaks for the self-employed
8) Don't get greedy: Generally, a qualified
business expense "must be both ordinary and necessary" in
government terminology. These are slippery terms, but keep them in mind. If you act in good faith, you'll be fine.
Otherwise, you could face steep fines.
9) Educational Expense: Any educational
expense is potentially tax-deductible. If one is taking courses or buying
research material to be more effective in their work, this can be deductible. Think
about any books, web courses, local college courses, or other classes or
materials that you have purchased to improve your job or business. It’s easy to
forget a work-related webinar or business e-book that was purchased online, so
remember to save e-receipts.
10) Write off tax preparation: You can deduct tax-preparation expenses, and books full of
tax tips or preparation software are deductible too, so there's no reason not
to get the help you need. For more information: Deducting
legal, professional and tax preparation fees
Additional IRS Resources:
- Small Business and Self-Employed Tax Center
- Publication 334: Tax Guide for Small Business
- Publication 535: Business Expenses
- Publication 505: Tax Withholding and Estimated Tax
__________________________________________________
Gardner
& Billing CPAs are experienced in assisting self-employed individuals in
getting the most out of their allowable deductions. Call us for a tax appointment to help us
better understand your business expenses.
The more we know, the more we can help!
