There are a few smart steps you can take to get ahead of the curve and they’re easy. Easier if you are self employed. For those who haven’t started at least a mom-and-pop business before December 31st there’s plenty to time to do it in 2011.
Last year 142 million Americans filed tax returns and according to “The Tax Foundation” most of them worried about paying the correct amount. Even people who hired professionals had concerns.
Millions were also tax return “nonpayment filers”, must the club you want to join. Nonpaying tax returns are those filed by individuals or couples who have established deductions or legal credits so on April 15th they owe nothing.
Sure, some get a refund after paying all year, some claim they ‘got it all back.” No they didn’t, government could not stay in business if they ran a filing business without getting paid. Yes, some nonpayer’s have over paid, usually through paycheck withholdings. Do you really want to do that?
It’s far better to become one of the 1/3rd of all American filers who paid less and did indeed get more if not all of it back. The way to accomplish this begins now, before next year’s Tax Day so you can turn tax-day into payday.
Use of computers, software, Internet consultants, lots of free services, coaches, consultants, and contractors, are available the tip of your fingers. If you choose a freelancers rather than a corporation do pick carefully. I ask people I know and trust, for names of freelance professionals they rely on.
People self-employed have unique tax concerns. Below are ten useful tax tips to keep Uncle Sam from taking such a bite out of you:
1. Make time to create records: You don’t have to be a big company with a full time CPA to maintain a trail of all income and expenses. One of the best methods is to set up financial software. Some of its free of charge, easy to understand. Just make a habit of entering any money moved, in or out or both, at the end of the day. Those few minutes will pay you off at the end of the year in both time and cash. Most banks are online so today the only records not available to you some place are cash deductions.
2. Business Areas: Where ever your business is conducted, home office or commercial property; do use part of it for conducting some social or commercial enterprise no matter how small. Then you can deduct that space of your home or other building, and deduct the percentage used exclusively for that purposes. Deduct this from your mortgage or rent payment along with yearly utility bills. Telephones count too when just for your financial enterprise.
3. Never overlook costs: Retain receipts in some form. This is especially important for items like office supplies, postal costs, organization dues, books and classes taken, seminars attended, business travel, newspaper and magazine subscriptions. Anything that costs you which is related to some small business you start, is deductible. This is true of the computer equipment you require and software to maintain records.
4. Need child care? Deductions are allowed for daycare, babysitters, nannies, and other childcare services needed while you work. Take all the deductions available, government wants people starting businesses because you become the people who make jobs eventfully for others.
5. Future retirement: Be mindful of starting a self-employed retirement fund like a SEP IRA). This serves more than just tax relief by setting aside guarantee of better tomorrows. Another savings option if possible is to start a $2,000 Keogh plan. This way you can up your tax-deferred savings.
6. Make Jobs: By starting your own even small enterprise you can hire family members. That allows you to deduct medical costs of family as legitimate employees.
7. Income deferments: As a self-employed person you are allowed to arrange money movement which lets you, if you so choose, defer income should you foresee yourself moving into higher tax brackets.
8. FICA return: As self-employed, yes, you are on the hook for employer and employee Social Security taxes. But, you can also deduct half of these payments when you file your IRS 1040.
9. Higher expenses a positive: Much the same as deferring income, if looking at income increases as you approach year-end, you are allowed to make business purchases that become allowed added-tax deductions, just do it before the last day of the year.
10. You’re not entirely on your own: If uncertain about tax savings there is plenty of support. Lots of competent tax preparers work from home very inexpensively. There’s nothing wrong with getting assistance, no matter how mainstream what you’re doing is, your business will always be unique.