Authored by Content Cookie in Taxes
Published on 03-17-2009
If you happen to be self-employed there are many things that you don’t really look forward to, like low sales in the last quarter. But the idea of giving away large sums of money beats them all. Here are some ways and means in which you can minimize your self-employment tax.
The best thing about being self-employed is that you have some really good tax situations and options open to you. Because you are not drawing a salary, you will be able to deduct every single tax credit and tax exemption available to you. All you have to do is understand the right deductions and avail of that facility. That is going to be done by organizing the business in such a way that you have maximum write-offs!
First of all you are going to keep receipts for every single business expense incurred by you. You’re going to write them off, because after all, you are self-employed. Every single item can be deducted. So start with expenses which are acceptable like usage of your cell phone, business expenses and mileage, office provisions and supplies, deductions for your home office which will of course include the rent and the mortgage. Naturally, if you have been filing your tax returns, after becoming self-employed, you know all these shortcuts. So let’s go on towards more precise, specific, and detailed tax approaches, which self-employed businessmen like you can use.
To make sure that the non-capital loss of the year is maximized, make sure that the expenses are exceeding the income. This is going to make sure that you are going to save a lot of money in the future. And just how is that? The losses which have been incurred are carried forward to a limit of seven years. These can be deducted against any future income. On the other hand, you can carry these losses backward for three years so that you can recover any taxes paid in the past. This means that even though you have not had a good business year, you can still have an income generating source. That is by applying all the losses to the previous years’ taxes. That means the tax bill for of the previous years, is effectively wiped out.
In the same manner, you can look at the side businesses you have. Many people have two businesses running at the same time. You might think that the side business is just a passing interest. But you do not know that it also comes under the category of a business, if it is making some money for you. This is going to help reduce your tax drastically. Now take yourself as an example. You are self-employed as a financial consultant. On the other hand, you also write financial articles for the glossies. That is why it is very easy to make sure that the taxable income has all these deductions. So, when you put in your income-tax returns with the income that you have got as a financial consultant for the year, you are going to deduct the money spent travelling during your consultancy job. After all you manage to get an article of it, did you not? And the article was published, wasn’t it? So your deduction is justified and legal.
Take the advice of professionals who will tell you the best way to minimize self-employment tax! Their fee can also be deducted from your returns!