Tax Tips For The Part Time Self Employed
Whether you are re-entering the workforce or shifting from full time to part time, handling taxes can be...well, taxing. To get you started, here is a primer in basic tax strategies for the part time self employed:
Always keep track of your expenses
- Business expenses can be written off come tax time if you have records of them. Consider obtaining a credit card in the name of your business and charge 100% of all business expenses there.
- Print and keep your membership receipts from BrainTrust, Inc. -- these are deductible as well.
Keep detailed records
- Keep a daily log of where you went who you meet and what you discussed. This will establish the business purpose of your expenses.
Note your mileage
- All business mileage is deductible. For 2007 the rate was 48.5 cents per mile. For the period January 1, 2008 to June 30, 2008 the rate was 50.5 cents per mile and for the period July 1, 2008 to December 31, 2008 the rate was 58.5 cents per mile.
Starting January 1, 2009 the rate is 55 cents per mile
Consider the business use of your home
- You can deduct the business portion of your home that is used exclusively for business on a regular basis.
Self employment taxes (social security, Medicare expenses)
- A self employed person is subject to self employment taxes at the rate of 15.3% for the first $102,000 in 2008 and $106,800 in 2009 and 2.9% for each dollar thereafter with no ceiling.
Plan for retirement
- Open an Individual retirement account or a profit sharing plan. A profit sharing plan must be opened before December 31, but does not have to be funded before the due date of your tax return including extensions.
Make estimated tax payments
- You are required to make federal and state estimated tax payments on April 15, June 15th, September 15th and January 15th.
Employer identification number
- You are required to obtain an employer identification number if you have employees working for you or you are required to file retirement plan tax forms.
For more details, there are many Internal Revenue Service publications you can obtain at www.irs.gov:
- Publication 343 Tax guide for the small business owner
- Publication 463 Travel, entertainment, gifts and car expenses
- Publication 535 Business expenses
- Publication 587 Business use of your home
Prepared by Cohen + Associates, Boston, MA
mac@cohenassoc.com
These tax tips do not constitute tax advice. For more information, please contact
www.irs.gov or a licensed CPA.
