What are some tax write-offs for the self employed?
I work part time for a startup and our team is only two people. My boss pays me from his personal expense account so there is no taxes taken out. What should I file and what tax write-offs should I consider to decrease the amount of money I owe back in a couple months?
Thanks for sharing.
The best write-off is the one that gets deducted from your tax return. But, the first thing that needs to be determined is, “Are you an independent contractor or other?”. Because according to the IRS guidelines, everyone has their own tax write-offs. Anything you pay for your business can be tax-deductible. But, if you are an employee, then you don’t have much to write-off. And if you are a 1099 contractor, then you can write-off anything related to your business expense.
Yes, I agree that taking deductions can help save self-employed individuals a ton of money, and it's just good practice to get in the habit of documenting your expenses so you can start making an itemized list. If you use your workspace exclusively for your business, you can deduct the costs of utilities, internet, office supplies, and any other regular business expenses.
Since keeping and organizing financial records isn't easy, you can consider a tax accountant to do the same accurately and efficiently. A tax accountant can help you prepare your tax files and advice you better on tax deductions. However, with sloppy accounting records, deductions can fall between the cracks because you didn't include them or your accountant is totally unaware of them. Therefore, you need a reliable, active tax accountant who responsibly becomes aware of all the money you earned and spent to prepare and file the correct tax return.
Below I’ve listed some of the tax write-offs that can be tax-deductible:
1. Home office
2. Vehicle use - Mileage or have the company buy the vehicle and depreciate it while
3. Gas and maintenance
4. Phone and internet cost
5. Entertainment for clients - meals
8. Retirement plan contributions
9. Advertising, marketing lead generation
10. Business insurance
11. Health insurance premiums
12. Donations to your favorite charity
Self-employed individuals often work from home. While you may not have to pay to rent out an office space, some aspects of working from home can still be included as a business expense.
I agree with the others, find out your tax status and then decide from there. Good luck!
-Consulting and lawyer fees
-Corporate formation fees
Anything you pay for your business, like internet services, domain fees, software fees.
These are all company expenses that need be reported.
If you are an employee then you and your boss can be in big trouble for doing it this way. There are so many great payroll services, I use www.gusto.com (formerly Zenpayroll) and it's $30/month for two employees and they pay all the taxes for you. The IRS has very stringent guidelines on employees versus contractors. Do some research.
If you are an employee you don't have much in the way of business expenses you can deduct. But, if you are a 1099 contractor then you can write off virtually anything remotely related to your business. For example, cars, mileage, computers, supplies at Staples, etc.
As everyone else said, you need to determine your status. In the event of being a contractor there's all sorts of things you could write off. I would urge you to be wise about it because a lot of people go crazy and write off everything from new cars to their cup of coffee every morning, but depending on your profit margin it can hurt you in the end. Say you made $50,000 and wrote off $15,000... that would mean you spent $15,000 to make $35,000 back... which isn't too bad. But say you masterminded a way to write off $45,000, that would mean you spend $45,000 to make $10,000 back which isn't all that great and depending on the circumstances they may want to have a hearing for you to state your case in terms of your work/business status to determine if you are indeed a functioning business or a "hobby". That's more along the lines of if you're operating as a contractor or business getting materials for wholesale prices and such. If you play it right you can get a nice kickback from the government but like I said... don't try to over do it.
First, I agree with the others. Your employment status needs to be determined as there are very specific guidelines on who is/isn't an employee. Secondly, if indeed you can be an independent contractor, any expense you incur for the work you do can generally be expensed; mileage, supplies, home office (if a dedicated space), etc. If you are a business owner and want to grow your business, networking, advertising, insurance (E&O), etc. are also expenses you may incur.
If you are working from home then you can claim £62 per month for the use of the home. Are you using your home phone number and broadband? If so, you can claim a percentage of the costs. You do not say what you are doing, but do you buy trade or professional magazines? If so the cost is tax deductible. What about professional fees and subscriptions?
Send me your details and I will send you a copy of our "Advice and Information for Clients" booklet which lists all the allowable expenses.
I think the first thing you need to determine is if you are an independent contractor in which case he will give you a 1099 or if he considers you to be working under the table (paid in cash basically). If he is considering you to be working under the table, basically filing taxes on that income will trigger some problems but working under the table is also illegal.
Now if he is considering you to be an independent contractor then he will give you a 1099 and you will file a schedule C plus the 1040. You can deduct any expenses you had involving your work such as travel or office expenses.
The other thing to keep in mind is to make sure if he is considering you to be an independent contractor that you really qualify. Doing an internet search will easily find some of the requirements to qualify as an independent contractor. If you don't qualify then he can be in more trouble than you are since he may have to pay back taxes and penalties. As an independent contractor, your own out of pocket costs for SS are higher but it is less than both the employer and employee share.
It is very important to ascertain your employment status ASAP.
There are specific criteria for W2, 1099, etc.
Your local Score.org chapter can likely provide advice.