Self-Employed Tax Strategies

Self-employed individuals often cringe at the amount of taxes they pay to the IRS and state. Listed here are tax strategies for self employed people that reduce those tax amounts.

Tax Strategies For The Self-Employed 

The great news is that being self-employed is one of the best tax strategies around. Unlike a salaried employee, the full scope of tax credits and deductions available in the tax code are now accessible to you.  The important thing, certainly, is to understand the available tax deductions and organize your business in a way which enables you to maximize the write-offs.  

The best tax strategy for self employed individuals is always to keep receipts for each business expense and write them off. Just about anything can be deducted, so do it. Acceptable expenses include things like cell phone usage, business mileage, office supplies, home office deductions which include part of mortgage or rent and so forth. If you have filed a tax return while self-employed, you may be already aware of this so why don't we proceed to more specific tax plans for self employed individuals. 

Maximizing your non-capital losses may result in big tax savings. If your expenses exceed your income for a year, then obviously you do not have to pay taxes for that year. What many people don't realize, however, is that these losses may be carried forward for a number of 7 years and can be deducted against future income. Additionally, these same losses can be carried backward 3 years to recover past tax payments. The outcome of this situation is that you could turn a bad business year into an income generator by applying the losses to taxes in other years which will successfully wipe out your tax bill for all those years.  

One more tax technique is to look at your side businesses. If you have one business, you will usually have a second that will be tailored to making some money through an interest. While you are in it mostly because you like it, you may not realize it qualifies as a business and can help you in reducing your taxes. Let's assume that you are primarily a self-employed consultant, but also write travel articles on the side. You might view the travel articles as being a hobby, but it is in reality a business. If you’ve sold or even attempted to sell any of your articles to a publication, all of your expenses in connection with travel writing can be deducted from your taxable income. This includes trips and so on. These kinds of tax deductions can considerably reduce your taxable income from the consulting business. Be sure to get a grasp of your overall business efforts, even if you don’t really consider them to be a business. 

Take into consideration employing your children to save on taxes. A child under 18 that works for you does not have to pay FICA and so forth. If the total wages for the year are less than $4,250, they will pay no taxes and this is a legitimate business expense you can write off. Obviously, the child would need to actually be performing a legitimate business task, but filing and similar manual tasks will definitely qualify.  

Tax strategies for the self-employed are plentiful. If you are self-employed, you may want to consider getting professional tax help.  A good tax specialist can save you thousands upon thousands of dollars in taxes, a lot more than making up for their fees. Oh, you will also be able to deduct their fees!