As an independent person, have you ever envy your friends employed at tax time?
have your own business significantly increases the amount of record keeping you have to do for tax purposes. When you delve into the business recipe boxes, it's easy to envy people who have only to enter the income of a W-2 form.
However, as an independent person, you get some tax breaks that your employees are not friends
For example, employees can deduct certain expenses, but only after they exceed 2 % of adjusted gross income
you can deduct business expenses from the top .. - and charges even reduce your social security and the tax on health insurance, you pay in the form of self-employment tax.
These tips can make the time less painful tax and help you take advantage of some of the tax advantages of working for yourself:
1. Take advantage of Medicare deductions
you can deduct health insurance premiums for yourself, your spouse and your dependents as an adjustment to income.
This includes the long-term care insurance premiums. The policy does not need to be in the company name -. It is deductible even if it is in your name
2. Keep fit your business simple,
Unless you need to form a partnership or company for any reason, the stick with a Schedule C, Sole Proprietorship. It is the easiest way to file, and there is nothing you need to lay off if you move on.
If you are looking for legal protection, obtain liability insurance (and your lawyer).
3. Automate your record keeping
keeping records of small business does not have to be as hard as used to be. In fact, shoeboxes (or groceries) full of crumpled receipts should be a thing of the past.
Use a personal finance software that is synchronized to your bank accounts.
holding automatic document not only saves you time, but it is less prone to errors, too.
4. itemized deductions with respect to business deductions
Taking a business deduction instead of an itemized deduction, you reduce your adjusted gross income and your self-imposed employment.
Whenever possible, deduct an expense or part of an expense as a business expense.
5. Pay your children
You can deduct amounts you pay your children to work in your business, and children generally pay less tax than you would.
The first child earns $ 5.950 is protected by the standard deduction, and any amount above that is taxed at the child, which is usually much lower than yours .
6. Take a home office deduction
If you have a qualified home office, you can deduct a portion of your other non-deductible expenses, such as part of your home insurance, utilities, and rent.
7. Avoid hobby trap
If the IRS considers your business to be a hobby, you must declare any income, but you will not be able to deduct expenses up to the amount of your income.
This is not okay if you are seriously trying to earn a profit - especially if you can achieve a beautiful taxable income in the years to come
It helps to make a profit in three of the five consecutive years, but you can always convince the IRS you are a for-profit business if you operate in a professional manner and keep good records.
on the other hand, if you make a little income every year for something that really is a hobby, as herding dogs and sculpture lawn ornaments, you may want that this continues.
Hobby income is not subject to self-employment tax, which would otherwise be 15.3% of your net income from the operation.
8. Turn charitable contributions in business expenses
Under normal circumstances, you can not deduct charitable contributions on your Schedule C. However, if you give the money to charities in exchange for advertising, it is a business expense.
This will give you a tax benefit than an itemized deduction.
9. Increase your pension contributions
Contributions to IRAs are still limited, but you can contribute more significantly by opening a SIMPLE SEP, or a profit-sharing plan in place.
10. Follow all business mileage
Whether you take the standard deduction for mileage or expenses for gas, oil, and other actual costs, you must have good folders to deduct vehicle expenses.
Your records should include mileage, purpose and date. Count each trip to the post office and meeting customer - those miles add
do you track your business financial statements, quarterly, monthly or more often !? . Share in the comments below
Credit: Philip Taylor PT via photopin cc
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