5 Tax Tips for Self-Employed Individuals in Any Field

Self-employment is like ice cream; it comes in a large variety of flavors. You can be a freelance writer, a graphic designer, a landscaper or a dog walker. Some people are self-employed full time, while others work part-time around their “day job”. Whatever your flavor of self-employment is, there are some definite tax tips you need to know.

If You Earn It, You Have to Declare It

If you do work for businesses, they will generally send you a 1099 form that you have to file at the end of the year. However, even if you work for individuals, or a business that does not send you a 1099 form, you still have to declare that income. Do not be fooled by thinking, “If I make less than $600 from one person (or business) during the year then I don’t have to declare it.” That is an often-misunderstood concept. The IRS expects you to declare every penny you earn.

Track Your Income and Expenses

You do not want to hand your accountant envelopes full of unsorted receipts and cashed checks come tax season. The accountant may miss some deductions because he or she could not find the right slip of paper. Even relatively inexpensive programs like Quicken work great. Keep track of all your hard copy paperwork and keep it organized as well. The IRS has very specific rules about business tax deductions and whoever does your tax return will need as clear a picture as possible to maximize your deductions.

Estimate Your Taxes

There are two ways to avoid being hit with a whopping tax debt at the end of the year. Either you have to be frugal enough to put away a certain percentage of every payment you receive, or you have to arrange with the IRS to pay quarterly estimated tax throughout the year. Most people choose the latter in order to avoid yearly penalties for underpayment. It may be tempting to spend all your money as quick as you earn it, but remember that just because no one took taxes out when you earned it, that does not mean you will not have to pay later. Estimating and paying your taxes is one way of avoiding having to file a tax extension form in the future.

Pick Your Name

If you are doing business under your own name, that is great. You just file a Schedule C form with the IRS and life is simple. However, if you are doing business under a company name, then you should have some sort of business license in order to avoid problems with the IRS. It can be a simple DBA (doing business as) license, but you want to make sure that you have all your legal paperwork in order before filing your taxes.

Self-Employment Tax

The IRS does charge a special tax rate for people who are self-employed. You will have to pay the self-employment tax, but you can deduct half of when figuring out your adjusted gross income. Form 1040 Schedule SE, available on the IRS website, will help you figure out exactly how much your self-employment tax will be.

Filing a tax return when you are self-employed is trickier than filing a regular tax return. Many people find that going to a professional tax accountant is well worth the initial fees in order to get the highest possible return they can. Unless you are very knowledgeable about business tax laws, you should keep yourself as organized as possible and seek the help of a reputable professional when it comes time to file your taxes.

About the Author: Annita Grosh is an accountant who specializes in working with self-employed invididuals. She loves watching as an idea becomes a workable and profitable business.

Home Business, Yay or Nay?

While the old American dream was once to land a steady job with good benefits and an early retirement, the updated version often entails becoming an entrepreneur and being your own boss. There are many challenges in steering your own ship, and yep many rewards as well. One advantage to working for yourself is that you know that you’ve got at least one person on board that really genuinely cares. As your own boss you can also guarantee that your opinions will be heard. But before making that big jump, you should really make sure you know what you’re getting into.

Here are some often overlooked changes you will experience…

Taxes

If you once were able to file a 1040EZ those days will soon be ones of the past. Taxes for your business will be involved, to say the least. And your personal taxes will doubtless be affected as well. Then you’ve got the cross-over items and the difficulty of trying to decide what can legitimately be itemized and for which. As an entrepreneur you will want to keep an eye on mileage costs and keep receipts for any business-related transactions.

Also be sure to check into any specific licensing or certifications you may require for your business and keep up to date on any registration renewals, if any.

Home Office?

A home office can obviously cut down on fuel costs and time spent going to and fro. Working from home can also keep you more connected with loved ones and may even get you tax breaks, if set up correctly. Though if you business is customer or client-based you may be required to have specific permits for such and to also carry extra liability insurance, should anything happen to someone on your property.

Another thing to consider is if you feel you can truly be productive while working at home. The Internet is distracting enough, what happens when you’re groggy all day and the bed is just a few feet away? Do you actually have enough space to specifically dedicate to an office? Will you and your family be able to agree on some kind of ground rules for specific hours of operation? These things and more should be considered before taking the plunge.

Insurance

As mentioned, if you have a home office you’ll most likely need extra insurance but don’t forget medical insurance and disability as well. An old 9 to 5 might have taken care of that for you but now that you’re the boss you do have to have a backup plan, should anything go wrong.

These are just a few of the I’s to dot and T’s to cross, there’s so much more. However, it’s a pretty terrific time to go into business for yourself – provided you think ahead, plan accordingly, and prepare yourself for the worst so that the worst never comes to call.

Written by Erin Nolan. Hurt yourself at someone’s business? Make a claim:¬†www.accidentclaims.org

Keeping track of your business mileage

The guidelines that are in place from the IRS enable workers and business owners to claim for mileage as a business deduction if you are using your vehicle for business purposes. Some people who are employed are able to deduct business mileage if it is not reimbursed by employers or is only partially reimbursed at a rate that is lower than the official business mileage rate.

Owners of small businesses also often use their vehicles for business related purposes and in this event they too can claim their mileage as a business expense. However, it is important that no matter why or how you are claiming for your business mileage you are able to differentiate between business and personal use mileage and that you do not end up claiming for mileage clocked up when using your vehicle for personal use, as this could be classed as a fraudulent claim. On the other hand you don’t want to miss out and end up claiming for less mileage than you have actually done for business. For these reasons it is vital to ensure that you keep track of your business mileage.

The easiest way to keep track of your business mileage is to use your odometer, which will enable you to see how many miles you do from the start of your journey until the end, each time you go out for business purposes in your vehicle. You simply need to record the number of miles that you do either on a spreadsheet or even in a notebook that you use specifically for logging mileage. It is also advisable to make a note on your spreadsheet or notebook about why you had to make this trip, as this is information that the IRS may ask for. Write or log down where you traveled from and where you traveled to, detailing any detours that you may have made en-route for business purposes.

Of course, many people forget to check their odometer before they head out and therefore, unless they have made the same trip many times and already have a record of the number of miles done, it can become difficult to estimate your business mileage for that particular trip. However, you can simply use an online map and enter details of where you travelled from and to in order to get a good idea of the number of miles that you have done.

Andrew writes frequently about personal finance as well as issues effecting both consumers and small businesses, covering everything from savings to mortgages to
Auto insurance car insurance.

Best Places To Live In The US – Deciding Before Retirement


At a party last week there started a discussion about the best places to live in the US. It quickly turned to matters of living in a pleasant climate with low cost of living as the group was primarily of the age about to reach retirement.

These friends were vigorously debating the virtues of living in a warm climate mostly to avoid the drudgery are dealing with winter temperatures and precipitation. Places like the Southwest and southern states dominated the conversation throughout.

If you are in the same age category as my friends and myself, there is a good chance you have considered this yourself. Statistics show that as the population ages and baby boomers reach retirement age more and more of them are choosing to move to the southern and southwestern United States.

It’s just too attractive an option when one no longer has the obligation of the job to be drawn to living in a place where the climate is primarily pleasant. Who wants to deal with snow and ice when another sunny day is a possibility?

If the move to a warmer climate is in your future, there are some tips that may help you decide which one is best. First set down in a quiet place with a pad and pen and begin by listing all your priorities. After you have listed them, place them in order of importance. This seems like a rather rudimentary task but one that is vitally important in any decision, especially when you are about to uproot your life and move to another part of the country.

The best places to live for you is not necessarily the best place for someone else but you can determine which place is preferred by using the exercise just described. Of course there are other considerations and you will no doubt want to visit each of the top choices that you come up with but finding your ideal location is not nearly as much of a challenge as it may first appear.

Tax Benefits For Parents

When doing your taxes there are so many things to remember that mostly everyone forgets about tax benefits for parents. You could receive benefits for your kids. Here are some ways to see if you apply.

– As of March 29, 2010 you can reduce premiums you paid for health insurance, but that’s only if you were self employed. If your child is under 27 even if they have never been your dependent you can claim them. Meaning if you have a child you have never claimed and he or she is under the age of 27 by December 31, 2010, then you can make them one of your dependents that’s only if you paid premiums on any health insurance, and you were self employed then you can minus the premiums you paid for it.

– If you have ever been laid off work and had to hire someone like a baby sitter or a nursery and daycare center. If your kid is under 13 years of age you might be able to claim them as one of your dependents. Meaning if you got fired and you have a kid under the age of 13 and you had to hire someone to watch them as you look for work, you could claim them as a dependent.

-The EITC is a program where you could benefit from incomes you have earned from farming, wages, and self-employment. Actually it takes down the wage of tax you owe and can possibly give you a refund. Therefor certain people can get rewards for incomes they have earned.

– When you have children and they have income that comes to them by working they possibly can have to file a tax return.

-Interest from student loans. If you have a kid that is in college and you pay qualified student loans you can reduce the interest you paid.

Before doing your taxes remember to check up on things and make sure if you have kids to research all the benefits available to you. Your tax return will benefit greatly from your knowledge of child tax credits.

Tax Return Mistakes To Avoid

For someone who is getting ready to file their personal income taxes, it is easy for them to be eager about the money that may be coming their way. This can cause someone to make mistakes on their tax forms, and to make mistakes that may end up costing them money, or getting them into trouble. One thing that not everyone wants is a tax audit, and this can often be caused by improperly filed taxes. There are many different things that you will want to remember when filing your 2010 taxes, to avoid an audit or additional problems after you submit your return.

The first is to make sure that you claim every single source of income that you have. This can be many different things that you do not think of, such as babysitting, garage sales, having a roommate, or if you do any freelance work on the side of your regular job. You will also want to have all documentation and paperwork for these different things, so there is no confusion when you need to provide documentation. People also make mistakes when they calculate their tax forms, so to avoid any hassles you want to double and triple check all of your calculations.

Other things that may catch the attention of the IRS is when someone tries to claim their own home as their personal office, or for other business purposes. There are limitations to the amount of money that you can write off for your own personal business, so you want to look into all of them before you file your 2010 tax return. You never want to be audited by the IRS, especially if you have done something wrong, because there are severe consequences. Double-check your work, and your documentations, to avoid and 2010 tax return mistakes.