10 Ways to Keep Uncle Sam from Taking Your Self Employment Income

Thanks to the new technology and the ease that the Internet and teleconferencing brings, this has brought about more and more people from all walks of life like coaches, contractors, professional consultants, and freelance workers to become self employed. As of late, being self employed does not mean a way of generating additional income to add to the current job, but as a primary income generator. Of these, there are many a full-time workers who are now making extraordinary incomes while setting their own hours of work. Nevertheless, self-employed people have very definite tax concerns. Peruse these 10 helpful tax tips to minimize the tax impact on your income.

1. It is important to have detailed record-keeping. This is a critical tax tip as without the resources of a large company to do this for you, it remains your personal responsibility to maintain the detailed records and receipts in the event that you have to document your tax deduction.

2. Deduct your professional space: If you use a separate office space or designate a portion of a spare room in your home or your basement, you are allowed to deduct the percentage of the part of your home you use exclusively for professional purposes. Claim a tax deduction for this percentage from your rent or mortgage payments, utilities, etc. If you keep a cell phone or land line exclusively for business purposes, deduct the amount from any bills.

3. Be sure not to overlook business expenses: Maintain thorough records and keep all receipts for professional travel and other business expenses, which may include supplies for the office, postal and shipping fees, dues for professional memberships, magazine or newspaper subscriptions, and other business items, including software for your computer or technical upgrades.

4. Subtract day care costs: There are many deductions that the IRS allows for different types of childcare that are provided during the time you work. It's easy to miss this kind of tax information, but it can save you a lot of money. It's important to take advantage of the available deductions.

5. Create a retirement plan: Consider creating a self-employed retirement plan (that is, a SEP IRA) for tax purposes, as well as for the sake of building money to fund your retirement. You can start with as little as $100, but should you have $2,000 or more, consider a Keogh plan option, which will allow you to keep more money for your retirement in savings that are tax-deferred.

6. Hire your family members: You may subtract medical expenses for the whole family if you hire them legitimately.

7. Defer income if needed: You, as the boss, have the ability to alter your billing slightly so that you can defer income should you discover that you are in an elevated tax bracket.

8. Do get refunds for your FICA. Since you are self-employed, you are required to pay both portions of the Social Security Tax, employer and employee. The good news is that you may deduct 50% of your payments on the 1040 form.

9. If needed, increase expenses: Just like you may choose to defer your income, should you find that you have a high income that pushes you to the next tax bracket, you may conduct more business purchases at the end of the year to augment some of your tax deductions before the 31st of December.

10. Get Tax Help: Seek tax help from a person who is very well-versed on self employment issues to get the correct needs.

The ease of communication permitted by modern technology including the Internet, teleconferencing, and mobile communication has led many professionals to begin working for themselves. Among these empowered self-employed professions are an increasing number of coaches, consultants, contractors, and traditionally agent managed freelance occupations. What may have been independently solicited work to supplement a main income, has now become the main full-time job for many. While this allows workers to set their own hours and be their own boss, it also means the self-employed must address their own unique tax requirements. Below you can find 10 ways to maximize the money you keep and reduce your taxes.

Ron Finkelstein is NOT a Tax Attorney or an accountant. He is merely a small business owner who has paid a lot of money over the years to learn these Self-Employed Tax Tips. Check out these other 5 Small Business Tax Deductions You Don't Want To Miss and How to save a bundle when filing business taxes

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