Work At Home Self-Employed Tax Strategies

Self-employed individuals always cringe at the amount of taxes the pay to the IRS and state. Here are tax strategies for self-employed individuals that reduce those tax amounts.

Tax Strategies

The good news is being self-employed is one of the best tax strategies out there. Unlike a salaried employee, the full scope of tax credits and deductions available in the tax code are now available to you. The key, of course, is understanding the available deductions and organizing your business in a manner that allows you to maximize the write-offs.

The number one tax strategy for self-employed individuals is to keep receipts for every business expense and write them off. Practically anything can be deducted, so do it. Acceptable expenses include cell phone usage, business mileage, office supplies, home office deductions including part of mortgage or rent and so on. If you’ve filed a tax return while self-employed, you are probably already aware of this so lets move on to more specific tax strategies for self-employed individuals.

Maximizing you non-capital losses can result in major tax savings. If your expenses exceed your income for a year, you obviously will not have to pay taxes for that year. What most people don’t realize, however, is that such losses can be carried forward for seven years and deducted against future income. Alternatively, the same losses can be carried backward three years to recover past taxes paid. The end result of this situation is you can turn a bad business year into an income generator by applying the losses to taxes in other years which effectively wipes out your tax bill for those years.
Another tax strategy is to look at your side businesses. If you have one business, you’ll often have a second one that is tailored to making some money off a personal interest. While you are in it mostly because you like it, you may not realize it qualifies as a business and can help you reduce your taxes. Let’s assume you are primarily a self-employed consultant, but also write travel articles on the side. You may view the travel articles as a hobby, but it is in fact a business. If you’ve sold or even tried to sell any of your articles to a publication, all of your expenses related to travel writing can be deducted from your taxable income. This includes trips and so on. These, deductions can significantly reduce your taxable income from the consulting business. Make sure to get a grasp of your overall business efforts, even if you don’t really consider them to be a business.

Consider employing your children to save on taxes. A child under 18 that works for you does not have to pay FICA and so on. If the total wages for the year are under $4,250, they will pay no taxes and you can write off this amount as a legitimate business expense. Of course, the child needs to actually be doing a legitimate business task, but filing and similar manual tasks certainly will qualify.

Tax strategies for the self-employed are plentiful. If you are self-employed, consider getting professional help. A good professional will save you thousands upon thousands of dollars in taxes, more than making up for their fees. Oh, you can also deduct their fees!

Richard A. Chapo is with BusinessTaxRecovery.com - obtaining tax refund recovery for overpaid small business taxes. Visit BusinessTaxRecovery.com to read more business tax articles.

Here are some legit tax company that you can file your tax online for free:

1. Tax Site - You can sign up for a consultation today and they’ll negotiate directly with the IRS on your behalf. You’ll finally be able to forget about your past tax problems and get on with your life. Resolve past due tax debt and stop outrageous finance charges!
2. Tax Act - Stop paying to file your taxes - TaxACT is your FREE tax software solution! Includes all the forms and schedules most taxpayers need to complete their return. Unlike other free products, TaxACT Standard includes schedules for itemized deductions, EIC, interest and dividend income, business income, and much more.
3. Tax Brain - TaxBrain is pleased to announce QuickAccess(TM) 48-Hour Money for 2008. Prepare and e-file your taxes online with TaxBrain and Get Money in 48-Hours*. TaxBrain offers the fastest refund anticipation loans AND your money is delivered by direct deposit or by paper check - the choice is yours.

*e-File is required with TaxBrain-QuickAccess refund loan programs. QuickAccess loans are offered by Santa Barbara Bank & Trust and are subject to loan approval. QuickAccess loans are available up to April 15th, 2008.

Do you sometimes question the performance of your investment portfolio? If you are like most investors you have your income producing assets thrown in together with your equity portfolio. You look at the total mix of dividend paying stocks, bonds, mutual funds and equities, and you’re confused as to why they’re not producing enough income or growing your portfolio value sufficiently.

I have found that part of the reason is the nearly universal propensity of investors to ignore the long-term implications of their income investment decisions while they focus on short-term effects.

Because fixed income investing simply isn’t regarded as being as exciting as other stock market investing, it has often been relegated to the “ho-hum” category by writers and not as much ink has been devoted to its ins and outs as has been expended on other types of investing. I think that’s a disservice to those interested in this type of investment.

Investing for income, be it taxable or tax-free, — and, for the record, my preference for generating tax-free income for clients is the use of CEETBFs (Closed End Exchange Traded Bond Funds) as described in my free e-book “How to earn 5% - 6.5% tax-free income.” — has some common denominators, which I have broken down into 10 rules. These will help you make better decisions and, at the same time, view income oriented investments with the correct mindset, so that you don’t constantly try to second guess yourself.

1. It’s important to consider the performance of the Fixed Income portion of a portfolio separately from the equity portion. Why? Because the objectives are entirely different.

Equity investments are for growth, while the primary purpose of owning fixed income securities is to generate a secure cash flow-either for spending or reinvesting until it is needed. For most people, the long-term goal of an Investment program is to generate enough income to live on, without having to touch the principal.

To most effectively analyze and manage your investments, keep your equity account separate from your income generating account.

2. All fixed income securities are “interest rate sensitive.” Because of this their market price will always “vary inversely” with the anticipated direction of interest rates. Interest rates on the rise, prices will fall. Interest rates thought to be headed south, investment prices will move higher.

This applies to all Bond, Preferred Stock, & REIT prices. Accept it and live with it! The variables for the movement in price are the quality rating of the issuer, the length of time until Maturity, or the Call Date.

Do remember that price changes in Fixed Income Securities are not an indicator of, and have little impact on, the ability of the issuer to pay interest. So instead of beating yourself up when interest rates start to rise, take advantage of higher yields.

3. Because of what they are, Fixed Income Securities are generally held for the long term. The factor to consider is the amount of income being received. There is no benefit in trying to predict the future direction of interest rates, and I strongly suggest you avoid that-along with constant monitoring of changes in portfolio value.

Remember, fixed income investing works in a way like your day-to-day personal finances. You pay your expenses from your income, not from your net worth.

4. Buy only fixed income instruments where the costs are transparent. In other words, many new issues sold by brokers can carry hidden costs. While commissions have to be disclosed mark-ups don’t.

There are often extremely large mark ups-3% or more is not uncommon-on new issues. Buyer beware.

5. Seek out instruments with the longest duration and only those that are Investment Grade. If you’re conservative, you can find many closed end funds that are insured and use no leverage, though they offer a slightly lower yield.

6. All Interest Rate Sensitive Securities follow the same rules! This means the value of everyone’s bonds will be going in the same direction as yours at any given time. Don’t submit to temptation. Emotions, fear, or other non-objective motives are not good reasons to switch from one Fixed Income fund to another.

Focus on diversification and avoid investments with yields that seem too good to be true. In that aspect, Fixed Income investing and Equity investing share a couple common guidelines: (1) if it seems too good to be true, it probably is, and, (2) no matter how good the hype, you can’t make a silk purse out of a sow’s ear.

7. Income production is the primary reason to purchase Fixed Income Securities. Once you truly understand that you will realize that the only thing you need to pay attention to on your monthly statement is the “Income Received” number. I suggest you ignore the others.

8. To become a successful Income investor, you must also understand the following points and agree with them:

* Higher interest rates are a boon to the Fixed Income Investor; they put more money in your pocket.

* Lower interest rates also offer benefit for the Fixed Income Investor; they give you the chance to add Capital Gains to the total spending money your investments generate.

* Changes in the market value of Investment Grade Fixed Income Securities should have absolutely no meaning to you 95% of the time.

9. Open Ended Income Mutual Funds will not serve your objectives. It is no secret that the fixed income variety almost never go up. As interest rates cascaded downward over the last several years, Open Ended Income Mutual Funds did not show the same degree of gains enjoyed by individual securities-while Closed End Funds did respond to these factors.

10. There are a number of reasons why it’s to your benefit to primarily use Closed End Exchange Traded Funds: Low acquisition costs, complete liquidity, professional fund management and monthly predictable cash flow. Additionally, you’re offered the opportunity to buy more when prices fall and to realize capital gains when interest rates are on the downturn.

Why haven’t you heard about these funds from your financial professional before? Especially now when many are yielding around 6% tax-free? For the simple reason that there is no money to be made for the financial professional recommending them. While these funds may increase your monthly income, they won’t do a thing for the commission hungry salesman.

If you manage your portfolio, hopefully these 10 points will assist you in more profitable investing. If you’re unsure about putting an income portfolio together by yourself, find a professional who works with these types of funds and is aware of the principles I have described, and let him or her assist you in creating the income you need to enjoy a dignified retirement.

© Ulli G. Niemann

Ulli Niemann is an investment advisor and has been writing about objective, methodical approaches to investing for over 10 years. He eluded the bear market of 2000 and has helped countless people make better investment decisions. To find out more about his approach and his FREE Newsletter, please visit: http://www.successful-investment.com.

When the month of April rolls around most of America is preparing their income tax returns. Each year all individuals who made an income are required to report that income to federal and state governments by filing an income tax return.

Taxpayers must file two separate income tax returns. One income tax return goes to the federal government and the other goes to the state government that a particular taxpayer resides in. The majority of taxpaying Americans are able to fill out a Form 1040A: U.S. Individual Income Tax Return. Individuals that do not have any children or other qualifying dependents are able to file a federal 1040EZ form. This form is also referred to as the Income Tax Return for Single and Joint Filers With No Dependents. The 1040EZ is basically a shorter version of the 1040A form; however, taxpayers must meet certain requirements before filing a 1040EZ form.

The majority of taxpayers will have the federal income tax forms they need mailed to their home. The option to have federal income tax forms mailed to a taxpayer is given on the previous year’s tax forms. Taxpayers who do not wish to receive federal income tax forms but do need them can get the forms from a number of sources. Many paper forms are available for pickup at many local post offices, banks, and libraries. Taxpayers can also visit the website of the Internal Revenue Service (IRS) which is found at http://www.irs.gov. The Internal Revenue Service has a collection of federal income tax forms that can be downloaded and printed. http://www.taxhelpdirectory.com/federalincometax/.

When a taxpayer reports their income earned to their state government they will also have to fill out a state tax return form. Each state has their own income tax return forms. The form numbers will all be different because they vary from state to state; however, some forms will have the same heading. It is not uncommon for a state income tax form to be known as the Resident Income Tax Return. As with federal income tax returns, the majority of states have a long income tax return form and a short one. Taxpayers who are able to fill out and file a short state income tax return are encouraged to do so because it saves many taxpayers a large amount of tax preparation time. As with most federal income tax forms, state tax return individuals are likely to have a packet of state income tax forms mailed directly to their home. It is also possible for taxpayers to find their state tax forms at their local post office, financial institution, or library.

In addition to the traditional taxpaying individual, there are others who have to report and possibly pay an income tax. All businesses and estate properties of an individual who has passed on are subject to an income tax. A small business owner or the executor of an estate property will have to file different federal and state income tax forms than the traditional taxpayer. These forms can be obtained at the same places where standard federal and state forms are available.

Gray Rollins is a featured writer for the Tax Help Directory. To learn more about income taxes visit, http://www.taxhelpdirectory.com/incometax/ and to learn more about income tax preparation, visit http://www.taxhelpdirectory.com/incometaxpreparation/.

Eliminate Back Taxes Today! Click Here!