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 The contents of this website do not constitute a professional service.  Always consult with a competent professional for advice on tax, accounting and other financial matters specific to your situation.  If you wish to engage our firm for this purpose, please contact our office.
 

Date last modified: 01/11/10

 

Tax Tips for Self-Employed
Sole Proprietors and Business Owners

  • Keep excellent records and maintain a separate checking account for your business!  Use a separate credit card for business purchases.  Identify all non-revenue deposits like loans, rebates, product returns, etc.  Record expenses at the time of purchase.  Ask for a receipt or invoice and identify the "purpose" of the expense.  Any expense that is not related to the business is considered personal and is an "owner's draw".  We can help small business owners set up a bookkeeping system and maintain it on a monthly basis.

  • Barter and Trading for services and/or products is considered taxable income and must be counted as such.

  •  Self-employeds can deduct 100% of health insurance premiums as an adjustment to gross income on their taxes if the policy is in the self-employed person's name and he/she is not eligible for coverage under a spouse's plan or a former employer's plan.  

  •  Keep a mileage log if the vehicle you drive is not dedicated solely for business purposes.  You must track the business miles you drive.  The same applies to cell phones used for both business and personal use.  IRS can ask for these logs in an audit and deny the deduction if no log is kept.

  • Ask Bill about setting up a SEP -- Simplified Employee Pension.  This is an employer-sponsored retirement plan for both employees and the business owner.  Even if you have no employees, you may be able to set up a SEP for yourself.  SIMPLE IRA's are also available.

  •  Is that person who does work for your business an employee or independent contractor?  Be sure you know the state labor laws before hiring someone and making the wrong assumption.

  • You can pay quarterly federal payroll taxes electronically.  Ask us about the details of the Electronic Federal Tax Payment System program.  You choose when the money leaves your bank account.