- Personal Finance»
- Income & Making Money
Tax Tips for the Self Employed
Tax Tips for the Self-Employed
The self-employed have unique tax concerns. Below are several tax tips to help lessen the tax bite:
1. Keep good records: It is up to you to keep records, save all receipts and be able to support your deductions. Be sure to back up all your records that you keep on your computer on a separate disc (CD) or paper copies in case your computer ‘crashes’.
2. Office space: You can deduct a percentage of your mortgage or rent payments as well as your utilities. If you have a phone exclusively used for business, deduct those phone bills entirely, otherwise keep track on each month’s phone bill by marking business calls. The IRS is very cautious about allowing these deductions and are specific as to what constitutes a ‘home office’. Especially for those in our type of industry (home party plan, selling items at shows, etc.) You can claim a home office as long as it is in a separate room such as a den, sewing room, etc that is not a part of common living areas such as a bedroom or living room or kitchen. They are cautious that people are not claiming a ‘hobby’ as an income.
3. Other business expenses: Keep receipts of your expenses including office supplies, postage and shipping costs, dues, subscriptions, and anything else business-related, including computer software for your business and upgrades to your system. Also keep a log book in your car so you can keep track of your miles traveled for business as well as all gas receipts for when traveling to and from shows or fairs, etc.
4. Deduct child care costs: There are allowable deductions for daycare, nanny care, babysitting and any other type of childcare provided while you are working. Take the deductions allowable but be sure to keep good records of hours and monies paid out for these expenses.
5. Get the right help:Look for tax help from someone who is familiar with self-employment, and especially familiar with our type of home business. “Self employed” is very broad term and encompasses a broad range of people. Online selling and party plan business’ are unique. The IRS as stated above sometimes looks at them as more of a ‘hobby’ than a typical income source, especially if you do not create a year round or very high income.
Items to keep receipts and records for:
- Vendor or craft show entrance fee’s
- Meals while at these shows
- Compensation (payment) for anyone helping you with your booth (monetary or product)
- Gas monies and mileage to get to the show (or a home party) and back home
- Cost of samples given out at the show (or home party)
- Child care cost while you are at a show (or doing a home party)