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FIGHTING THE IRS FOR TAXPAYERS!
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Wednesday, January 25, 2012

Tax Tips for the Self-employed Taxpayer from the IRS

There are many benefits that come from being your own boss. If you work for yourself, as an independent contractor, or you carry on a trade or business as a sole proprietor, you are generally considered to be self-employed.

Here are six key points the IRS would like you to know about self-employment and self- employment taxes:

1. Self-employment can include work in addition to your regular full-time business activities, such as part-time work you do at home or in addition to your regular job.

2. If you are self-employed you generally have to pay self-employment tax as well as income tax. Self-employment tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. You figure self-employment tax using a Form 1040 Schedule SE. Also, you can deduct half of your self-employment tax in figuring your adjusted gross income.

3. You file an IRS Schedule C, Profit or Loss from Business, or C-EZ, Net Profit from Business, with your Form 1040.

4. If you are self-employed you may have to make estimated tax payments. This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. Estimated tax is the method used to pay tax on income that is not subject to withholding. If you fail to make quarterly payments you may be penalized for underpayment at the end of the tax year.

5. You can deduct the costs of running your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.

6. To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.

One of my own:

Self-employed people can set up a retirement plan and put away more than the IRA limit, sometimes almost $50,000. This can then be deducted, subject to certain limitations, which will reduce your adjusted gross income on page 1 of the Form 1040.

If you need someone to talk to about forming a corporation, preparing your tax returns, creating an estate plan, or other issues around being self-employed, please call me at (513) 563.1595. Also, if you don't have a financial planner with whom to discuss retirement planning, let me know. I can give you several names to choose from.

Monday, January 16, 2012

Important Information for Veterans

Attorney Victoria Collier has written a guest blog post for the American Academy of Estate Planning Attorneys about Eligibility Verification Reports (EVRs) that are due no later than March 1st each year.  If you are a Veteran or practice in this area, take a moment to read her timely information.  Here is the link:  http://tinyurl.com/6w4xky5


Paul

Wednesday, January 4, 2012

2012 Standard Mileage Rates

The standard mileage rates for using your car, van, or pickup or panel truck beginning January 1, 2012 will be:

  • 55.5 cents per mile for business miles driven,
  • 23 cents per mile for medical or moving miles drive, and
  • 14 cents per mile when driving in service of a charitable organization
For more information, contact you tax advisor or check the IRS web site at http://www.irs.gov.