Tax Tips for the Self Employed

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-- Heidi & Jenn

Okay, so I’m taking a break from eBay topics for now. Not everyone sells on eBay, but all of us WAHM’s have one thing in common - being our own boss. Unless you consider the little bosses (aka: children) who sometimes try to control our lives! lol  

Well, being self-employed also comes with a whole load of tax-related advantages and savings. In fact, it’s considered to be one of the best tax strategies of our time! Aren’t WE smart?
Seriously though… self-employment allows you to have full command of your tax situation and, with the right knowledge, you can have more control over the amount of taxes you pay.

Here are some tips for making the most of your self-employed status:

1. Probably the most important advice you can utilize as the owner of your own business is to keep thorough and accurate records. Keep all of your receipts and make sure you have the documentation to support your tax deductions.
2. Do you have children? Just because you work from home, or for yourself, doesn’t mean you don’t need childcare while you’re working. If your children are in daycare, take advantage of the deductions allowed for childcare costs.
3. Do you enlist the help of family members with your business? Why not make it a family affair? If you employ your family members legitimately, you should be able to deduct their medical expenses.
4. Let’s talk about your workspace. Whether you work from a dedicated office in your home or a little nook in the basement, you can claim that area. Determine which percentage of your home your workspace makes up, then deduct this percentage from your rent or mortgage and your utilities.
5. You cannot create a loss in your business solely through the use of home office expenses. You can, however, reduce your income to zero - thus reducing your income tax and your self-employment tax. Plus, any expenses not claimed in the current year can be carried over to the following year.
6. Do you use your car for business? If your office is in your home, chances are you do. Do you pick up office supplies, take packages to the post office, make bank deposits or shop for eBay inventory? Any driving you do that is tied to your business can be taken advantage of as a tax deduction.

Most importantly, be knowledgeable in tax laws. The Internal Revenue Service (IRS) is very aware of the many tax advantages of self-employment, thus it is an area they are subject to keeping closer tabs on. So study the forms and instructions provided by the IRS. If in doubt, don’t hesitate to utilize a professional tax preparer or Certified Public Accountant (CPA). They do this stuff for a living, so more often than not (at least for me) it’s worth the extra cost to be sure everything is done right.

We only have 3 months left of this tax year, so if your records are not organized yet - you may want to get started!

Good luck!