Tax Tips for the self employed!

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Being self-employed definitely has its perks. When you run your own business, you are in charge of your day and are responsible for all of the decision making for your business. Working for yourself also gives you tax advantages that are not available to those who work for others. Take a few minutes to learn about some of the benefits and rules that apply to tasks you have to accomplish on the daily and how you can profit from them.

  • Deductible expenses are any expenses that are ordinary and for the use of your small business.
    • ¬†Expenses related to the business use of your home, include:
    • Certain amount of rent
    • Utilities
    • Phone
    • Internet service
    • Meals and entertainment
    • Business use of your vehicle or the standard IRS allowable mileage rate for your tax year.
    • Depreciation of some property and equipment you purchase.
  • Solopreneurs generally have the responsibility of paying quarterly estimated tax payments for both income tax and self-employment taxes. If you fail to make these periodic payments or you underreport your income, you may be subject to penalties and interest.
  • Is your small business making you money? Thats great! At this point, that means self-employment taxes and income tax may need to be paid. This includes, Social security and Medicare taxes. These must be paid by anyone who works for him or herself and earns $400 or more a year as of 2015.¬†Taxes are assessed based on your net earnings. To calculate this, you first have to figure out the net profit for your business.
  • Thinking about your future? One of the top tax breaks for small business owners is for making contributions to your own retirement plan. This may be the most valuable tax break available to the self-employed. If you are in business for yourself and have no employees, consider setting up an individual 401(k) plan. As of 2015 and 2016, you can contribute up to $18,000 in pre-tax earnings to a 401(k) plan, plus an additional $6,000 if you’re 50 or older.