Tax Tips for the Self-Employed

Tax Tips for the Self-Employed

 Self Employed?  Want Deductions?  Keep Good Records

Keeping track of expenses during the year and understanding what is tax deductible can be challenging if you’re self-employed.  The best way to keep it stress free is to set up a record-keeping system (using manila folders, spreadsheets or web applications) that captures income and expense information in a way that matches how deductions are reported to the IRS.  If you are a sole proprietor, get familiar with the requirements for completing Form 1040, Schedule C, and use that to help you get organized. When records are organized with your tax needs (including deductions) in mind, tax filing goes smoother, and in the unlikely event of an audit, you are better prepared.

Here are some examples of common tax deductions for sole proprietors.  Just remember to keep receipts (hard copy or electronic), credit card statements are not enough. 

 

  • Monthly membership expenses at the CoLab can be deductible as a business expense. 
  • Business-related car or truck expenses can be deducted at the standard mileage rate (57.5 cents per mile for 2015).  Use a log book to track odometer readings for business-related travel.
  • Self-employed individuals can deduct 100 percent of health insurance (NOT health care) costs incurred for themselves and their families.
  • Telephone expenses are deductible.
  • You can deduct the cost of business supplies purchased during the tax year.
  • You can deduct professional fees, such as those paid to your accountant or attorney.
  • Travel-related expenses (lodging, airfare) are fully deductible if the main purpose of your trip is business. You may deduct 50 percent of meal and entertainment expenses directly associated with your business. Make sure you write down the purpose of the meeting and people attending on the meal receipt.

 

Want to learn more?  Visit our website at www.thebusinessguides.com under “tax tools” for a tax records retention guide. You can also use IRS Publication 334, Tax Guide for Small Business.

Charley Kanieski and Sarah Hadlock are CPAs guiding business owners in Jefferson County and throughout Washington State. The Business Guides, a business-only accounting and financial consulting firm operating out of Port Townsend offers a wide range of services.  We guide small business owners in tax planning and compliance, business profitability and cash flow, and help them achieve financial freedom.  We also guide business owners in financial life planning, retirement and business exit strategies.

Call The Business Guides at 360-385-6961 or email at ashley@thebusinessguides.com to schedule your free 1-hour consultation.

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