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What
to Know About Self-Employment
Are you or are you considering becoming self-employed?
If so, are you aware that there is a self-employment tax? This is one
of many reasons why it is very important for people who are
self-employed to plan ahead. You may not receive the big refund you
are expecting if you do not prepare throughout the year or consult a
tax professional for assistance.
A large part of planning involves keeping business records and mileage
logs. The IRS requires sole proprietors to maintain a current log
book; otherwise, all mileage can be disallowed during an audit. If you
sell a product, you are required to have an Employer Identification
Number (EIN) as well as to file a sales tax return. If you hire others
to work for you, you must know the difference between an employee and
an independent contractor in order to file the necessary
employment/unemployment taxes.
The second part of planning involves tracking your business expenses,
especially deductible expenses for a home office. Depending on whether
or not you meet with clients in your home, such expenses can include
office repairs, painting, carpeting, decorating, utilities, lawn care,
snow removal, etc. Expenses for long distance calls as well as cell
phones are deductible if the calls are strictly made for business
purposes. As for meals and entertainment, only fifty percent of
expenses are deductible. In addition to new equipment purchased, don’t
forget about office supplies such as pens, pencils, paper clips, etc.
Also, if you attend classes, you may be eligible for the Hope or
Lifetime Learning Credits.
In order to receive the deductions you deserve, you must keep an
accurate record throughout the year. You can use the spreadsheet below
(or download Excel file here) as a guide to help track your expenses and make your tax planning a
little easier. If you have any questions regarding self-employment
requirements or if you would like to schedule a tax-planning
appointment, please call our office at 847-247-0020.
| Date |
Supplies |
Phone/ Cell Phone |
Advertising |
Commissions & Fees |
Insurance |
Licenses & Taxes |
Legal & Professional Services |
Rent |
Rent vehicles & machinery |
Repairs |
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