Being self-employed is not just being able to be your own boss. It is also about being able to put more money in your pocket at Tax Time. And wouldn’t you rather pay yourself than Uncle Sam?
But, as with any strategy, knowing how to implement it is crucial. That knowledge will allow you to be in control of your tax situation instead of being at the mercy of the IRS. This article is designed to begin the process of increasing your knowledge in this important area.
Following are some tips for making the most of your self-employed status:
Record keeping is the sure way to put your mind at ease when it’s your business. Receipts, ledgers, documentation; these are the building blocks to saving money on your taxes. This makes it easier when it comes time to pay your taxes. And in most cases, you will surprise yourself with how much they save you as well.
Do you have children? Just because you work from home, or for yourself, doesn’t mean you don’t need childcare while you are working. If your children are in childcare, take advantage of the credit allowed for childcare costs.
What if, instead of putting your children in childcare, you put them to work for you? What a great way to make it truly a family business! If you do it the right way, you can deduct wages, bonuses and other fringe bonuses.
Let’s talk about your workspace. Whether you work from a full office in your home or a nook in the basement, you can claim the area. Determine which percentage of your home your workspace makes up. Deduct this percentage from your rent or mortgage, utilities, and repairs from your taxes.
You can even carry forward unused expenses to the next year. Again, here’s where accurate records pay off. This tip can help you reduce your income (and taxes against it including self-employment tax.)
Remember that little trip to make the bank deposit? If you’re self-employed, that trip is a tax deduction. Your car is a business tool when you are self-employed. In other words, it’s a money maker, to help you pay less taxes.
Knowing what you’re doing can mean the difference between Uncle Sam putting the moves on your money, and you putting the money in the bank. And the IRS does watch self-employed income closely because of the super advantages owning your own business affords. But if you keep your wits about you, and good records, you can win the match.