Tax Preparation Tips for the Self-Employed

 

 

 

 If you work as a self-employed person, your tax situation is different from that of someone who is an employee. Preparing independent taxes can be a bit of a minefield, but you can lower your tax bill by taking advantage of deductions. Here are some tips for preparing your independent tax.

1. Stay informed of your paperwork

1. Stay informed of your paperwork

If you work as a self-employed person, you are responsible for keeping your own data, especially your income and expenses. If you want to use tax deduction, you must retain all relevant receipts in case you are selected for an IRS audit.

2. Decide how you pay

2. Decide how you pay

Self-employed persons must pay estimated taxes based on the amount that you think you will pay to the IRS when you submit your tax return. Once you have calculated your estimated tax, you pay it on a quarterly basis to avoid fines or interest (which is very likely. If you leave your estimates until April 15 of the following year). In addition to being a safer option, it also reduces the temptation to spend the money you have set aside for taxes. Please note that this payment is only an estimate and that the amount you actually owe may be more than you expect.

3. Set money aside for taxes

3. Set money aside for taxes

To avoid being hit by a tax invoice that you cannot pay, you must transfer 20 to 25% of all income to a tax account that is specifically used for money that you have allocated to pay your tax assessments. In this way you have reserved money for paying your taxes for working as a self-employed person and you do not need to borrow money quickly from your savings account to scrape the money together. Because it is in a separate account, you shouldn’t be tempted to get into it for other expenses, but if you think you’re tempted, you make it harder to access the money by opening an account. use that is not directly linked to your check account.

4. Contribute to an IRA

4. Contribute to an IRA

This is often overlooked as a tax deduction, but it can have major benefits. Although you cannot pay for a 401 (k) if you are self-employed, you can save your pension in a self-employed pension fund such as an SEP IRA and you have the additional benefit of acting as a tax reduction. If you are a sole trader and you receive compensation as a person. You can contribute a maximum of 25% of your net adjusted income from independent activities or company profits. SEP IRA contributions are usually 100% tax deductible from person. Annual income.

5. Use tax deduction

5. Use tax deduction

As a self-employed person, you can request certain deductions to lower your tax assessment. Here are some of the tax deductions that you may qualify for.

  • The deduction from the home office . If you work from an office in your home, you may be able to pay part of the costs of your energy bills, secondary telephone. Yekylines (think of cell phones and Skype accounts that are used for business calls) and mortgage and insurance deduct payments. Ideally, this office should be separate from your living spaces. For example, it should be in a private room instead of just a work space in the corner of your bedroom. It makes it easier to determine what can be deducted. You must complete IRS form 8829 to see whether you can benefit from the deduction. Before you fill in the form, you need the exact dimensions of both your home and office space, because the percentage of your expenses that can be claimed is determined by the percentage of your home that serves as office space. Many people fear that claiming this deduction increases the chance that they will be checked by the IRS, but this does not prevent you from using the deduction if you qualify. The IRS look for a number of red flags before they choose who to audit.
  • Appointments of job times. If you use job sites or websites to find freelance or contract work and have to pay a membership fee, you may be able to deduct these as work yacht costs.
  • Unpaid invoices. If customers have not paid, you may be able to debit the unpaid invoices as doubtful debtors, but you must first add the amount (s) to your total income from independent activities.
  • Office provides deductions. Office supplies that are used for your business may be deductible and this may extend to office equipment such as computers or computer hardware that are used. Jekyllangs have been purchased for business use.
  • Fiscal services. Many self-employed people prefer having an accountant take care of his taxes to save time and to prevent potential problems that arise if you make mistakes. If you choose to use the services of a tax professional, you can debit this as a deductible expense.

If your small business is your full job and primary income, we strongly recommend that you hire a tax professional to help you prepare your taxes. It is a fact that more independent entrepreneurs are controlled by the IRS, so you want to make sure that your tax return is done properly the first time.

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