1. Self-Employed Incomeand Taxes. 2. OverviewWe will cover
valuable information on the taximplications of self-employment.
When are you considered self-employed? What are common business
deductions? More on automobile expenses. More on meals and
entertainment and equipment. More on business use of home.
Self-employed health insurance and retirement. Other considerations
for higher earners. 3. What does being self-employedmean? You are
self-directed and control activities that impact yourearnings. You
will typically receive a 1099-MISC form, if you earnover $600
self-employed income from a single source. When you are
self-employed you pay an additional 15.3%self-employment / FICA tax
on your net income. 4. What are general business deductions? Cost
of Goods Sold (inventory) Advertising/Marketing Website Office
Supplies Postage Telephone (limited to business use portion) Travel
(including automobile expenses) Meals and Entertainment Equipment
Business Use of Home 5. Automobile ExpensesYou are able to take
either actual auto expenses or use yourmileage for the year and
apply the standard rate ($0.56 per milefor 2014). Most of the time,
applying the standard rate will getyou a higher deduction.For the
first year, we recommend that you keep up with bothand then
determine the best approach.1. What were the TOTAL miles driven for
the year?2. What were the business miles driven for the year?3.
List of actual expenses. 6. Meals and Entertainmentand Equipment
Meals and Entertainment are 50% deductible. Equipment is often
treated differently. Thoseexpenses may be spread over time
(lessadvantageous). Under new IRS regulations, anyequipment under
$500 may be expensed if a writtenprocedure is in place. 7. Business
Use of HomeSomething that you should think about from thebeginning
of the business. You will need to know thefollowing information:1.
What is the square footage of your entire home?2. What is the
square footage of the portion solely usedfor business (home
office)?3. You will need to compile the TOTAL of all homeexpenses
(utilities, home mortgage interest or rent,real estate tax,
repairs, etc.).4. Alternative method is to take a deduction of $5
persquare foot of home office up to 300 square feet. 8.
Self-Employed Health Insuranceand Retirement Plans If you are
self-employed, you can write off your healthinsurance easier than
employees can. You would deduct the actual amount of health
insurancecosts to the extent they exceed your business profits.
There are various self-employed retirement plans, aswell as
traditional IRAs which allow you to contributepre-tax dollars to
retirement. 9. Higher Self-Employment IncomeStrategies If your
self-employed net income (after expenses) willbe greater than
$30,000, a S-Corporation strategy maymake sense. With this
approach, you limit the amount of your incomesubject to the 15.3%
self-employment tax. There are various steps to take, therefore,
you shouldwork with a professional on this election. 10.
Questions?Email: [email protected]
