Darlees.com

Being your own boss can be a richly rewarding experience, but many people put it off because they fear facing a complex tax system. In reality, the tax process for self-employed individual persons can be fairly simple, & offers its own set of rewards.

Self-employment tax deductions are a blessing for all those who run their own business, or are planning to set up a new enterprise. These individual persons can claim tax benefits that were not available when they were working as employees. So… Self-employed professionals can use their Social Security numbers as business tax identification numbers, & file taxes under Schedule C or Schedule C-EZ. It’s important to understand the two schedules, because each gives a different set of benefits.

Schedule C-EZ is intended for use by those with relatively small business expenses, who finish the year with a profit, have no employees, do not report depreciation & have no need to claim a home-office deduction.

Schedule C is for many more elaborate business enterprises. In addition to gross income, you’ll be asked to provide detailed information about your business expenses. Unlike Schedule C-EZ, with Schedule C it’s possible to report a loss & realize a tax saving.

If you’re self-employed, the following tax deductions are available to you:

Home Office

If you use part of your home merely for bookkeeping & file storage, you may still claim a home office deduction. This is possible even if you spend a good deal of time conducting business outside of your home office.

Equipment Expenditure

Section 179 is a benefit that allows you to deduct the entire cost of equipment purchased for your business in the same year. This deduction includes costs incurred on purchasing a computer, office equipment, filing cabinet or any other item relevant to your business requirements. There is more. There is a limit to this claim, & the allowable amount changes frequently. Check with IRS Publication 946 for the amount you’re able to claim.

Travel & Entertainment

Business-related travel, mileage & a percentage of meal & entertainment expenses are also deductible. Be sure to keep all receipts & be prepared to explain the purpose of the expenditures in order to make these deductions.

Health Insurance & Social Security Taxes

Deductions are available for health insurance premiums paid for yourself & your family members. A part of the payment you make as social security tax can also be retrieved from your total income. This deduction is available on Form 1040.

Self-managed Retirement Benefits

Consider opening a Keogh or a Simplified Employee Pension plan to realize greater tax savings. Right. When you file your Form 1040, the contributions that you make to either of these plans from your earnings can be subtracted from your adjusted gross income.

If worries about the tax system keep you from realizing your self-employment dream, stop worrying. Do you follow? The process can be a simple one, & the tax breaks available to you can assist your dream become reality.

Donald Brown contributes to many web sites, including http://tyrop.com & http://sixal.com

You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.