Self-employed individuals constantly cringe at the amount of taxes they pay to the government. Here are tax strategies for self-employed individuals that trim those tax amounts.
Tax Strategies
The good news is being self-employed is one of the best tax strategies available. Different a salaried employee, the full range of tax credits and deductions available in the tax acts are now available to you. The key, is understanding the available deductions and organizing your business concern in a way that allows you to maximize the write-offs.
The number one tax strategy for self-employed individuals is to put aside receipts for every business disbursement and write them off. Just about every expense can be deducted. Some examples of 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 your non-capital losses can lead to a major tax savings. If your expenses pass your income for a year, you evidently will not have to pay taxes for that year. What most people do not realize, however, is that such losses can be carried forward for years and deducted against future income. Alternatively, the same losses can be carried backward to recover past taxes paid. The end result of this position is you can turn a bad business year into an income generator by applying the losses to taxes in other years which effectively clears 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 formed to making some income off a personal interest. While you are in it for the most part because you like it, you may not realize it qualifies as a business and can help you reduce your taxes. Let's presume you are chiefly 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 concern. 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, advertising 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 do not really consider them to be a business.
Think about employing your children to save on taxes. A child under 18 that works for you does not have to pay certain taxes and so on. If the total wages for the year are under a certain amount they likely will pay no taxes and you can write off this amount as a legitimate business expense. Check with your accountant to get the rules and points of law in your area. It goes without saying the child needs to actually be doing a legitimate business task, but filing, photocopying and similar manual tasks surely will qualify.
Tax strategies for the self-employed are everywhere. If you are self-employed, think about acquiring professional help. A good professional will save you thousands upon thousands of dollars in taxes, more than making up for their fees. And as we have learned, you can also deduct their fees!
Tax Strategies
The good news is being self-employed is one of the best tax strategies available. Different a salaried employee, the full range of tax credits and deductions available in the tax acts are now available to you. The key, is understanding the available deductions and organizing your business concern in a way that allows you to maximize the write-offs.
The number one tax strategy for self-employed individuals is to put aside receipts for every business disbursement and write them off. Just about every expense can be deducted. Some examples of 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 your non-capital losses can lead to a major tax savings. If your expenses pass your income for a year, you evidently will not have to pay taxes for that year. What most people do not realize, however, is that such losses can be carried forward for years and deducted against future income. Alternatively, the same losses can be carried backward to recover past taxes paid. The end result of this position is you can turn a bad business year into an income generator by applying the losses to taxes in other years which effectively clears 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 formed to making some income off a personal interest. While you are in it for the most part because you like it, you may not realize it qualifies as a business and can help you reduce your taxes. Let's presume you are chiefly 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 concern. 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, advertising 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 do not really consider them to be a business.
Think about employing your children to save on taxes. A child under 18 that works for you does not have to pay certain taxes and so on. If the total wages for the year are under a certain amount they likely will pay no taxes and you can write off this amount as a legitimate business expense. Check with your accountant to get the rules and points of law in your area. It goes without saying the child needs to actually be doing a legitimate business task, but filing, photocopying and similar manual tasks surely will qualify.
Tax strategies for the self-employed are everywhere. If you are self-employed, think about acquiring professional help. A good professional will save you thousands upon thousands of dollars in taxes, more than making up for their fees. And as we have learned, you can also deduct their fees!
Self-employed individuals must file their income tax return with the federal government by June 15th each year. From experience, we have discovered that the majority of self-employed individuals actually hand over the paper work to their accountant a day or two before the deadline.
Can the accountant do a good job for you? Logic would say no. There is not enough time to review each and every deduction you are entitled. To ask the questions and get the proof needed to use the deduction or credit. The accountant has a very narrow window of time and you are likely not the only return they have to prepare before deadline.
So the issues are:
1. Are you getting the best preparation of the tax return and getting all the deductions you deserve? Most likely no.
2. Is there anything that can be done after the returns are filed, years later? Yes! Returns can be reviewed and refiled up to 10 years. You may be owed money from the government.
We have teamed up with an accounting firm that specializies in auditing self-employed individual's tax returns. Normally, money is found and a refund is due. This is money due back from the government meaning money in your pocket. On most instances, an individual owes money to the CRA, however, after the service they are actually owed funds back.
This firm works on a contingency bases, meaning if they find nothing for you, you owe them nothing. This is how confident they are in their services. They are sure you are owed money. There is nothing to lose.
Call our office in Waterloo for more information 1-800-878-1952 Ext 0 or if you prefer email bhconrod@consultant.com
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