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:
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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!

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