Tax Deductions For Self employed And Independent Contractors

More Tax Deductions For You

In a previous post I went over some tax deductions you can take if you are self employed or considered an independent contractor. In this post, I will go over even more tax deductions that you can take, and I will also touch on some tax deductions that you cannot take.

Also, remember that you have 3 years to amend a previous tax return. If you see some legimate deductions you have may of missed in previous years, it will be to your benefit to amend your returns, using form 1040X. Contact a local tax attorney or other professional tax preparer for help if needed. Also, here is the link to the IRS on amended returns. IRS Website

Interest Expenses: You can deduct interest that you accrue from debts during the tax year as long as the interest is related to your business. The loan must be used for a business expense. This is deducted on Schedule C

Legal and Professional Fees: Deduct fees for accountants, attorneys and your tax preparer for expenses related to your business. You cannot deduct fees paid to acquire business assets. These fees are added to the basis of the property.

Rent: Payments you make for property you do not own to operate your business are tax deductible. If you have equity in the property or will receive equity or title to the property, rent is not tax deductible. If you rent your home and use part of it as a place of business, you may be able to deduct part of the rent on form 8829. You also must meet the requirements for business use of a home.

Taxes: You can deduct a wide variety of federal, state, local and foreign taxes, as long as they are directly related to your business on Schedule C.

Deduct state income taxes on gross income that is a direct result of your business. Also, if you itemize your deductions, there are other state and local income taxes that can be deducted on Schedule A.

Employment taxes are tax deductible. This includes Social Security, Medicare and federal unemployment taxes.

Also deductible is the self-employment tax, which is deductible for independent contractors also. You can deduct one half of your tax on form 1040.

Personal property tax can be deductible. You can deduct this tax used in your business. Also, registration fees paid for right to use property within a state or local area are deductible.

Deduct your real estate taxes that you pay on your business property. These are state or local taxes on real estate that are for the general public welfare. The taxes must be based on the assessed value of the real estate. The taxes also must be uniformly charged on all property under the jurisdiction of the taxing authority. Report these on form 8829.

Sales tax: Sales tax you pay on a service or the purchase or use of property is treated as part of the cost of service or property:

If the service is a deductible business expense, deduct the tax as part of service or cost.

If the property is merchandise that you bought for resale, the sales tax is part of the cost of the merchandise.

If the property is depreciable, add the sales tax to the basis.

State and local sales taxes you collect from your customers are not tax deductible.

Fuel taxes: These taxes are not deductible.

As you can see, there are many deductions you can take. There are even more that I will go further into in a future post.

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Tim Watson is a tax preparer during the season who also runs an SEO directory and an iPod directory. You may use this article as is provided the resource box stays intact.

Filing Status if You Are Married

One thing I have noticed in doing taxes is that some married couples will come in and want to file Married Filing Separately (MFS) versus Married Filing Jointly (MFJ). Usually the reason is that only one works, and the spouse that works thinks it is better to file MFS. I'm here to tell you that 98% of the time it is to the taxpayer's advantage to file MFJ.

For starters, if the couple has children, they cannot claim the Earned Income Tax Credit. Also, there is the matter of another exemption, which in 2006 was $3300, which helps reduce taxable income. There are many other benefits also, but these are 2 of the main ones. This right here will cost you money.

There is also the standard deduction. In 2006, this figure was $10,300 for MFJ. The amount for MFS was $5,150, the same was filing single. As you can see, that is over $5000 in tax benefits to you.

In addition, the Modified Adjusted Gross Income (AGI) phaseout range in 2006 for deductible IRA contributions, with an active participant, was $75-85,000 for MFJ, and $0-10,000 for MFS and living with the spouse who is active in the plan

This past tax season, I had couples who wanted to file MFS instead of MFJ. I explained to them at the beginning that it is usually better to file MFJ. After completing their taxes, but before sending it to the IRS, I would have the software run the comparison program, and every time the tax benefit was better for MFJ. The amounts ranged from a couple of hundred to thousands of dollars, all in favor of the taxpayers.

There was 1 common scenario to all of these clients: ALL had been told by someone it was better to file MFS. I gave them this advice, and I will give it here to you: Do not listen to tax advice by anyone who does not prepare taxes. Period. I had a lot of other clients who were also told false information on other topics.

To repeat, do not listen to tax advice from anyone unless if the person actually prepares taxes. You can cost yourself a lot of money and aggravation. When in doubt, go to the IRS website.


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Tim Watson is a tax preparer during the season who also runs an SEO directory and an iPod directory. You may use this article as is provided the resource box stays intact.

More Tax Deductions

More Insurance Deductions: The taxpayer can deduct malpractice insurance that covers personal liability for professional negligence.

Workers Compensation: Set by state law, this covers any claims for bodily injuries or a job related disease suffered by employees in the taxpayers business, regardless of who is at fault.

State Unemployment Insurance: Contributions made to a state unemployment fund. These are tax deductible if they are consideredtaxes
under state law. Check with your state law for more information.

Overhead Insurance: This insurance pays the business overhead expenses if the taxpayer has long periods of disability which is caused by injury or sickness, and is tax deductible.

Business Interruption Service: This pays the taxpayer if their business is closed down due to fire or other cause, and is also tax deductible.

Life Insurance: This is only tax deductible if the taxpayer is not directly or indirectly the beneficiary under the contract.

Automobile Insurance: The insurance paid that covers the vehicles used in the course of the taxpayer's business. If the taxpayer uses a vehicle partly for personal use, only the business use is deductible. Also, if the taxpayer uses the standard mileage rate, the automobile insurance cannot be deducted.

One very important thing, the taxpayer cannot deduct the expenses in advance, even if the expenses are paid in advance. For example, if you paid insurance for 2007 and 2008, you can only deduct the expenses for 2007, and the 2008 insurance the next tax year.

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Tim Watson is a tax preparer during the season who also runs an SEO directory and an iPod directory. You may use this article as is provided the resource box stays intact.

Tax Deductions That Can Be Taken

Deductions For Self-Employed and Independent Contractors

Let us take a look at some of the tax deductions that can be taken if you are self-employed or an independent contractor.

Business Expenses: In order to be tax deductible they must be both ordinary and necessary. If an expense is partly business and partly personal, separate the business part. The business expenses are reported on Schedule C.

Bad Debts: A business bad debt is one that comes from operating a trade or business but the debt is not collectible. Report this on Schedule C, Line 27. For all other non-business bad debts, they are deductible as short term losses on Schedule D.

Car Expenses: The cost of maintaining and operating a vehicle for business purposes are tax deductible. You can either use standard mileage or actual expenses, whichever gives you the best benefit. This includes going from one workplace to another in the course of business, visiting clients, and going to a business meeting away from your regular workplace. Keep a daily log of all miles driven and business miles driven, and keep receipts for gas, tolls, oil changes and the like.

Depreciation: You may acquire property for your business that you expect to use more than a year. Instead of deducting the entire cost as a business expense, spread the cost over more than one tax year and deduct part of the cost each year. I will go more into depreciation in the future.

Gift Expenses: You can deduct no more than $25 for business gifts given directly or indirectly to any one person during the course of the tax year.

Insurance: You can deduct fire, theft, storm, accident or similar insurance, credit insurance on losses from unpaid business debts, and medical insurance for employees. There are many other types of insurance you can deduct. I will cover those in the future.

This is only the tip of the iceberg on what can be deducted. Stay tuned for more on deductions.

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Tim Watson is a tax preparer during the season who also runs an SEO directory and an iPod directory. You may use this article as is provided the resource box stays intact.

Taxes For The Self Employed and Independent Contractors

Self Employed or an Independent Contractor?

To first see if you are self employed or an independent contractor, let us first read the definition taken
right from the IRS.gov web site:

Self-Employed

You are self-employed if any of the following apply to you:

* You carry on a trade or business as a sole proprietor;
* You are a member of a partnership or limited liability company that files a Form 1065, U.S. Return of Partnership, that carries on a trade or business; or
* You are otherwise in business for yourself.

You are also self-employed if you have a part-time business, in addition to your regular job.

Independent Contractor

The general rule is that an individual is an independent contractor if (the person for whom the services are performed) has the right to control or direct only the result of the work, and not what will be done and how it will be done or method of accomplishing the result.

People such as lawyers, contractors, subcontractors, public stenographers, and auctioneers who follow an independent trade, business, or profession in which they offer their services to the public, are generally not employees. However, whether such people are employees or independent contractors depends on the facts in each case. The earnings of a person who is working as an independent contractor are subject to Self-Employment (SE) tax.

And to add to this, people who make money on the internet are also considered self employed.

Now that we know the definition of SE/IC, I will later go into more detail on what deductions
are allowed for the various jobs, as that is a separate, very long post in itself.

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Tim Watson is a tax preparer during the season who also runs an SEO directory and an iPod directory. You may use this article as is provided the resource box stays intact.

Keep Your Tax Records

Keeping Tax Records the Right Way

Men are governed by laws not by men. Moreover, almost every aspect of your life is invaded by the laws of the land. From the disposition your properties, to the expected norms in the society and eventually to the manner of paying tax contributions, no one is considered above the law. For that reason, there are things that you need to comply and consider in order to adhere to what the law expects of you. Tax laws may seem complicated depending on the state you are in. A Tampa tax attorney will have different legal advice compared to a tax attorney in Ohio, because of the fact Florida has no state income tax. The tax system of different states is diverse. Tax law, which is a codified system of laws that covers government levies on certain business or economic transaction, imposes taxes. These taxes are delivered back to taxpayers by way of government projects. If you fail to do your duty as a taxpayer, the financial penalties can be harsh. All of the arguments against income tax have been shot down by the courts, and the penalties are even more harsh is a person is found to have brought a frivolous lawsuit.

Tax law is a sub-discipline in law schools. They are consultative in nature however; they can be used in litigation purposes. Tax law is crucial in business as well as personal planning matters. If you are facing an Internal Revenue Services (IRS) trouble, you need a tax attorney to assist and defend you.

Tax laws demand that you keep tax records for the government to check. These records can also serve as proof of your compliance with the tax laws. Nevertheless, many taxpayers have no idea about what records to keep and how long to keep them.

By tax records, it means tax returns and several documents that support your returns like bank statements, receipts, 1099s, and more. These documents are important to fend off the IRS. Your tax attorney will tell you what these records are and how important they are.

However, to make it easy for you, here is a quick review:

Tax returns contain the tax contribution that a taxpayer has to pay. They serve as a good proof that you have paid your taxes moreover; they have to be kept indefinitely. The IRS is known for misplacing and losing tax returns so be sure that yours come in handy to circumvent a audit. The IRS is receiving millions of tax returns every three months moreover; lost returns can be said to be part of the inevitable. Hence, it is better to keep every single tax return that comes into your possession.

If you are filing your tax returns electronically, be sure to get a copy of your return, the preparer or firm are required by law to give you copies. Supporting documents, on the other hand, should be kept for a period of 6 years from the filing of the returns. However, this period can be extended in special cases. If you are filing from software on your computer, make sure to print at least one copy.

Tax records are vital in case of divorce proceedings. Also, I tell my clients to save the necessary documents like financial documents, tax returns, supporting documents, and credit reports, not just for divorce purposes but for other circumstances as well. If you do not keep these records, anticipate encountering a nightmarish chapter in your life. It is better to keep your tax files in one place, a filing cabinet will be fine for this purpose.

If you are lucky enough, you will never need your tax records. However, if you belong to the unlucky few who are audited, tax records will be your saving grace to prove your compliance to tax laws.

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Tim Watson is a tax preparer during the season who also runs an SEO directory and an iPod directory. You may use this article as is provided the resource box stays intact.

Florida Tax Attorneys

Florida Tax Attorneys

Attorneys or lawyers are among the people who take responsibility in maintaining harmony in the community. They are the ones who take the initiative to let things sail on smoothly. They are expert in managing the court cases filed against their clients. Whatever type of criminal or civil case that the client gets involved in, it is the duty of the attorney to defend him or her.

The tax law draws clearly the government levies which are placed on every economic transaction. They are hence known as taxes. In truth, the tax law is among the sub-disciplines and areas to be concentrated on by the students in the law schools. Florida tax attorneys are certainly the people who have taken the thorough analysis of the tax law.

The tax law nonetheless covers a lot of areas. Among them are the sales tax, income tax, property tax, excise tax, inheritance tax, as well as the corporate tax. Since the tax law is very much emphasized in Florida, it is not to be doubted that the Florida tax attorneys are always in demand. It adds more to their popularity that they are able to play the very crucial consultative roles in the legal aspect.

The Florida tax attorneys are usually the products of the best law schools in the United States of America. Their license certificates are derived from the Florida Board of Legal Specialization. As budding tax attorney specialists, what they need are the sufficient training background, written examinations, and enough dose of experience.

So what can a tax attorney do for you? In almost all cases, the clients come to the tax attorneys for the same reason and that is to be saved from the tax disputes they are facing. Getting involved in problems and troubles with the Internal Revenue Service calls for the service of a Florida tax attorney. The tax attorney is acquainted with several modes on how to lessen the most possible punishment to be rendered by the IRS. A tax attorney is likewise able to quickly solve the problem in an efficient way since he has the adequate knowledge to do so.

Most of the law practitioners in Florida are male. But of course there are also the female attorneys. The attorneys manage court cases with regards to real estate, criminal law, family law, personal injury, workers compensation, bankruptcy, and many others. Tax attorneys are mainly members of the Florida Bar Association which is the official organization supported by the Supreme Court in Florida. The Florida Bar Association is the official statewide recognized regulatory group for the practicing lawyers.

http://www.floridabar.org/tfb/flabarwe.nsf

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Tim Watson runs www.timothyjameswatson.com, and is the owner of this
membership site and has links to many other articles on his Tim Watson home Page
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