Tax Help Tips for Saving Money on Taxes for Freelance Professionals and Self-Employed Individuals (Part 2)

If you are a self-employed independent contractor, you need to know that the tax clock is ticking and you’re in danger of letting serious income tax relief money slip through your fingers. If you’re not careful, you could also make some common self-employed independent contractor income tax mistakes that will mean you’ll owe back taxes on your 2009 income tax return.

If you’re a freelance self-employed professional, the most important thing to do while planning your taxes is to stay on top of your income and deduction management. As many Americans have discovered in this down economy, starting your own business is a good way to cut back on taxes because business expenses are considered legitimate tax write-offs. However, you must be careful when categorizing business expenses to avoid owing back taxes and incurring IRS penalties for mis-categorizing personal expenses as business expenses. This is a tax crime and is severely punishable.

For more ways to legitimately maximize deductions while avoiding IRS tax problems, check out Part 1 of this series on Year-End Tax Tips for Independent Contractors and Self-Employed Individuals Who Need Income Tax Relief.

To help you save money on your taxes and get the income tax relief you need, here are 10 important tax planning strategies to consider:

Tax Help Tip for Self-Employed Freelance Workers #1: Sweet charity ain’t just a musical. When it comes to your charitable giving, to get the maximum income tax relief of course you should give as much as you can before December 31st, but there might be additional ways to meet your charitable goals while easing your back tax burden. If you donate your services to a charity, you can deduct the market value of that contribution from your taxes. Perhaps you can set up a foundation that would receive funds to meet your charitable goals without showing up on your balance sheet as income. Of course you don’t want to be on the hook for tax fraud so a tax attorney can give you tax help you set up the charitable giving plan that provides you and your business maximum income tax relief.

Tax Help Tip for Self-Employed Freelance Workers #2: Buy stuff. If your self-employed independent contractor business needs supplies and big ticket items, buy them before year end so you can get the deduction early. Sneaky income tax relief tip – if you buy a big ticket item on December 31st, instead of January 1st, that one day allows you to get a full year’s worth of depreciation.

Tax Help Tip for Self-Employed Freelance Workers #3: Don’t forget to take (tax) credit where credit is due. There are lots of income tax relief in the form of tax credits that you may be eligible for, such as the earned income credit, the child and dependent care tax credit and the first-time home buyer credit.

Tax Help Tip for Self-Employed Freelance Workers #4: Home is where the office is. To get the maximum income tax relief, make sure that all qualified business expenses end up on your balance sheet. If you have a home office, make sure that everything that goes into that office is accounted for, including telephone, Internet access, supplies, repairs and maintenance, etc. The home office deduction used to be IRS audit bait, but today more and more self-employed independent contractors have home offices. Just make sure that you are following the IRS’s home office guidelines: http://www.irs.gov/newsroom/article/0,,id=108138,00.html. If you have claimed a home office deduction and you sell your house, you will have to consult with a tax attorney for tax help on how best to handle the recapture depreciation issues unique to your situation.

Tax Help Tip for Self-Employed Freelance Workers #5: Buy a mileage log book and fill it out. If you use your car to go from your home office to the job site, that is a travel expense (which is tax deductible), not commuting costs (which aren’t tax deductible). Keep a mileage log book in the car. Before the year is out, consult with a tax attorney to get the tax help to clarify which travel expenses (and car costs) are legitimate for your industry and which are sure-fire audit bait.

Tax Help Tip for Self-Employed Freelance Workers #6: Separate your work and life: If you haven’t done so already, open separate accounts, phone lines etc. Make clear distinctions so the IRS can see what are self-employed independent contractor expenses.

Tax Help Tip for Self-Employed Freelance Workers #7: Have a yearning for some learning to keep you earning: Remember that professional training courses and seminars in your field are tax deductible. Education is an investment but also a nice source of income tax relief. Pay for it today, even if the course is next year and you’ll get the deduction.

Tax Help Tip for Self-Employed Freelance Workers #8: Pay the nanny. As a self-employed independent contractor, you can deduct daycare, nanny care, babysitting and any other type of childcare provided while you are working. This creates income tax relief but it also has hidden dangers. If you have hired a nanny as an employee, don’t forget to pay his/her Social Security taxes. Forgetting to pay Social Security taxes on childcare has gotten a lot of people into IRS tax trouble. If this is you, get tax help from a tax attorney.

Tax Help Tip for Self-Employed Freelance Workers #9: Pay the wife and kids. Your family can produce more income tax relief than just the standard deductions. In addition to paying family members for the legitimate work they do, as employees you can also deduct their medical expenses. Paying family members also helps create a team feeling for your business and teaches children the value of work and necessary life/office skills.

Tax Help Tip for Self-Employed Freelance Workers #10: Get tax money for love. Get married and/or have a kid before December 31st for sure-fire year end tax deductions. Who says Uncle Sam doesn’t feel the love?

While there are certain tax benefits to being a freelance worker – such as tax write-offs for business expenses, remember that you must tread carefully during these tricky times so that you do not find yourself mired in financial turmoil with the IRS. Stay informed and remember that if you do find yourself with tax problems, you are entitled to representation by a tax attorney or tax resolution specialist when dealing with the IRS.

For more information on achieving a tax resolution for your back taxes or IRS debt, visit www.taxresolution.com for a free tax relief consultation or call 866-IRS-PROBLEMS.

More Tax Help, IRS News and Tax Relief Tips:

  1. Year-End Tax Tips for Independent Contractors and Self-Employed Individuals Who Need Income Tax Relief (Part 1)
  2. Tax Help: Nation’s Leading Tax Relief Expert Shares Tips on How Small Businesses Can Avoid IRS Audits
  3. Tax Resolution Expert-Five Reasons to Hire One
  4. Reduce Back Taxes and IRS Penalties: 7 Little Secrets the IRS Hopes You Never Learn
  5. Tax Problems Affect 1 out of 6 Americans

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One Response to “Tax Help Tips for Saving Money on Taxes for Freelance Professionals and Self-Employed Individuals (Part 2)”

  1. Year-End Tax Tips for Independent Contractors and Self-Employed Individuals Who Need Income Tax Relief (Part 1) Says:

    [...] To learn more ways to legitimately maximize deductions while avoiding IRS problems, check out Part 2 of this series on Tax Help Tips for Saving Money on Taxes for Freelance Professionals and Self-Employed Individuals. [...]

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