The taxman must be paid, and self-employed individuals face more taxes than most. The average employee does not realize that the employer picks up part of their Social Security tax. If you are your own employer, then you will have to pay that full tax on your own. This tax for 2011 totaled 13.3 percent. The bright side of being self-employed is that you have access to new and wonderful tax deductions, effectively lowering your taxable rates for Social Security, Medicare and the Federal Government. Here are a few deductions you should watch for, particularly if you make your money on the Internet.
You cannot always expect people to pay for work before itâ€™s done. There will be times when you perform the work, send the invoice, and then hope that you receive payment. If you arenâ€™t paid, you can write off the balance as a bad debt if you use the accrual method of accounting.
Selling items online is all about finding the right niche. This means that you have to educate yourself, and that research can be a valuable write-off. This includes conferences, books and any other expenses related to learning more about your niche.
Coffee Shop Meetings
Working from home doesnâ€™t mean that business will never take you away from home. If you have meetings with other people to discuss business, then you have a travel and entertainment write-off. On the receipt, jot down the name of the person you met with and the business discussed to substantiate the deduction.
Internet Related Fees
Any fee charged in the course of running your business online is deductible. This includes the following:
â€¢ Monthly Internet fees from the provider
â€¢ PayPal fees charged for receiving or sending payments
â€¢ Website fees for hosting
â€¢ Domain name registration and renewal fees
â€¢ Special software for running the business
â€¢ Online subscriptions used for business
Tread carefully with the home office deduction. You cannot write off the entire living room just because your desk sits in one corner. The room must be dedicated to use as a business, and you can only write off the equivalent percentage. However, this write-off extends to the utilities, taxes, mortgage interest, repairs and even cleaning expenses.
Products for Review
If you are trying to sell items online, itâ€™s always good if you try the product first yourself. That personal review is what people want, but you canâ€™t offer it without laying out some money. The good news is that the items you review are also tax-deductions.
Working online is rewarding and provides you with a very flexible schedule, but there are still going to be times when you need to spend some money for services. Articles are a great way to drive business to your site, but you may not have the time to sit down and write them. If you pay someone else to do some work for you, those payments are a marvelous tax deduction that can really lower your tax expense.
Drum up some business in the areas you visit with branding. Add your logo to shirts, business cards, promotional items and even your car. The cost of the branding is a deduction, and you might even be able to write off part of your car payment as an advertising expense.
The tax deductions for the small business owners are many, provided you know what you can take. Keep receipts throughout the year and log your activities so you can substantiate the deductions when tax time rolls around again.