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Self-employed Tax Strategies
By: Richard Chapo
Self-employed individuals always cringe at the amount of taxes the pay to the
IRS and state. Here are tax strategies for self-employed individuals that reduce
those tax amounts.
Tax Strategies
The good news is being self-employed is one of the best tax strategies out
there. Unlike a salaried employee, the full scope of tax credits and deductions
available in the tax code are now available to you. The key, of course, is
understanding the available deductions and organizing your business in a manner
that allows you to maximize the write-offs.
The number one tax strategy for self-employed individuals is to keep receipts
for every business expense and write them off. Practically anything can be
deducted, so do it. Acceptable expenses include cell phone usage, business
mileage, office supplies, home office deductions including part of mortgage or
rent and so on. If you’ve filed a tax return while self-employed, you are
probably already aware of this so lets move on to more specific tax strategies
for self-employed individuals.
Maximizing you non-capital losses can result in major tax savings. If your
expenses exceed your income for a year, you obviously will not have to pay taxes
for that year. What most people don’t realize, however, is that such losses can
be carried forward for seven years and deducted against future income.
Alternatively, the same losses can be carried backward three years to recover
past taxes paid. The end result of this situation is you can turn a bad business
year into an income generator by applying the losses to taxes in other years
which effectively wipes out your tax bill for those years.
Another tax strategy is to look at your side businesses. If you have one
business, you’ll often have a second one that is tailored to making some money
off a personal interest. While you are in it mostly because you like it, you may
not realize it qualifies as a business and can help you reduce your taxes. Let’s
assume you are primarily a self-employed consultant, but also write travel
articles on the side. You may view the travel articles as a hobby, but it is in
fact a business. If you’ve sold or even tried to sell any of your articles to a
publication, all of your expenses related to travel writing can be deducted from
your taxable income. This includes trips and so on. These, deductions can
significantly reduce your taxable income from the consulting business. Make sure
to get a grasp of your overall business efforts, even if you don’t really
consider them to be a business.
Consider employing your children to save on taxes. A child under 18 that works
for you does not have to pay FICA and so on. If the total wages for the year are
under $4,250, they will pay no taxes and you can write off this amount as a
legitimate business expense. Of course, the child needs to actually be doing a
legitimate business task, but filing and similar manual tasks certainly will
qualify.
Tax strategies for the self-employed are plentiful. If you are self-employed,
consider getting professional help. A good professional will save you thousands
upon thousands of dollars in taxes, more than making up for their fees. Oh, you
can also deduct their fees! Click the links to the right to find help with
minimizing your taxes.
About the Author:
Richard A. Chapo is with
http://www.businesstaxrecovery.com - recovery of
business taxes through tax help and tax relief. Visit http://www.businesstaxrecovery.com/articles
to read more business tax articles.
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