Tackling taxes if you’re self-employed

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Retirement savings can minimize taxes

Contributing to a tax-advantaged retirement plan enables you to accomplish two important goals. First, the money you deposit into a qualified plan is a deduction in calculating adjusted gross income, which reduces any income taxes you might owe whether or not you itemize your deductions. Second, it offers you a tax-beneficial way to build up a nest egg for retirement. This is particularly important for self-employed workers who don’t participate in an employer-sponsored plan. Self-employed people or business owners are eligible for several different kinds of tax-advantaged retirement plans, including a one-participant 401(k), a Simplified Employee Pension IRA, or a SIMPLE IRA. Be sure to ask your CPA for more details about retirement savings options and how they lower your tax bill.

Other deductions

If you use part of your home for your business, you can deduct expenses related to that portion of your home. Beginning with your 2013 taxes, you can even use a simplified option that makes it easier to calculate your proper deduction. To qualify for the deduction, the home office must be your principle place of business and it must be used regularly and exclusively for that business. You can also generally deduct any other business-related costs, including office or storage space, supplies and equipment, phone, travel, automobile mileage, advertising, and salaries for any employees or contractors you may use. Expenses for education that relates to your self-employment also may be deductible. Consult your CPA to be sure you’re taking all the deductions for which you qualify.

Make your business more successful

Whether you’re just starting out or considering how to take your business to the next level, there are many tax and business planning considerations that can put you on sound financial footing. Remember that taxes aren’t the only important issue if you’re self-employed or own a small business. Have you considered the possible advantages of a more formal business structure ? LLCs work well for many one-person businesses, and generally don’t complicate your income tax filing requirements.

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