Tax-Saving Tips for Self-Employed Individuals
If you’re self-employed, you have a lot to consider, especially when it comes to paying your taxes. You want to find ways to lower your tax bill, and the IRS has certain things in place to help you. You still have to do your part, which includes keeping track of all your expenses. Doing so will allow you to deduct them from your taxable income.
There is an increasing amount of people who are working as freelancers, and they are doing it for a variety of reasons. Some have gone into business for themselves because they have been subjected to corporate downsizing, and some of them are looking to supplement an existing income. Whatever the case may be, you need to be diligent in your effort to keep track of your business activity.
Basic Tax Rules
If you make $600 or more from a client, you will receive a 1099-MISC from them, and the IRS will be sent a copy as well. Self-Employment Tax also has to be paid if your net earnings for the year are more than $400. This money goes toward Social Security and Medicare, which is calculated on Schedule SE. A portion of that amount can also be deducted on Form 1040. You will also have file W-2’s and 1099’s for all employees and independent contractors.
Lowering Your Tax Bill
If you’re self-employed, there are some things you can do to lower your tax bill, and the obvious one is to keep track of your business expenses. This is because you can deduct them from your taxable income. You can also deduct any miles you have driven for business purposes. This can include meeting with clients or going to another work location.
You can claim 57.5 cents for every mile you have driven for your business, which includes the cost of parking and tolls. If you do a lot of driving for your business, you can lower your taxable income by keeping an accurate log of every trip you’ve taken.
You should also mix your business trips with any personal vacations because you can deduct some of these expenses from your taxes. If you go on a business trip, and you decide to stay an extra few days for a short vacation, you can deduct any expenses that were incurred during the trip. This includes the cost of airfare.
However, you can’t deduct any expenses that are associated with the personal days, unless you’re staying there longer to get a cheaper fare. And as long as your expenses don’t cost more than what you saved in airfare, you can deduct your hotel expenses and 50% of your dining costs.
Retirement accounts are also a good way to lower your tax bill, because any contributions are on a “tax-deferred” basis. You are able to put up to 20% of your net profit in a Simplified Employee Pension Plan (SEP) or a Keogh Plan, and no tax is paid on that money until it’s withdrawn.
Finding a Tax Professional
Being self-employed has its rewards, but you have to do your part if you want to lower your tax bill. Still, it pays to find a professional to help you put it all together at the end of the year, but there are many types of tax professionals. So, it’s important to find the right one.
It’s important to know what your specific problems are, which is why you need to find the right person for the job. Tax accountants can help you file your tax return, but they won’t be able to help you if a legal issue should arise. A qualified tax attorney would be better suited for this role, and they will be able to represent you in court.
Tax Law Tampa has a team of expert tax attorneys who can help you prepare your tax return, and we will make sure you’re complying with current tax regulations. We can also help you if a legal issue should come up later on. Our attorneys will be able to sit down with you, and they can come up with a solution that will put your tax problems behind you.
If you want to find out how we can help you, get in touch with us today!