Taxman

April 9, 2012

**I have made some adjustments and corrections to this post based on some helpful feedback.**

I don’t know where I have been lately, but I can only guess it was a place so remarkable that I could only write one blog post in the past month.  Any guesses?  No?  Okay, I was lying before.  I do know where I was.  I was actually just busy and preoccupied.

This time of year, there’s a lot going on.  The weather has started getting nicer, so instead of blogging on Saturday mornings, I’ve been trying to get some exercise out in nature.  I’ve been doing all sorts of busy-work, like getting pictures framed and starting seeds for the garden and finally thinking about the Ides of April…the date we all dread…the day when we feel like the government reached into our pockets and stole our money and our dignity and our hope for the future…

TAX DAY [insert loud minor chords being played on Dracula’s organ].

Ok.  Now for something a little less dramatic.

I’ve been self-employed now for a while, and even when I was still dabbling in “employment” here and there, taxes were not my favorite thing, as you can imagine.

For those of you who haven’t yet started your self-employment, or who are procrastinators just now getting around to thinking about taxes, like me, this post is for you.

Some things to know:

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There is a separate and larger “self-employment” tax for us lucky ones.  Yay!  Solution: deduct as many things as possible.  The loses will be taken from your Gross Income and lower your taxable income by as many dollars as you have spent on your business or your professional life.

Pretty much anything you buy that has to do with your work-life is deductible on your taxes.  Instruments, uniforms, gasoline, cost of service to your car, plane tickets and hotel accommodations to conferences, conference fees, AMTA member dues, CBMT courses and dues, cost of food at business meetings, a new computer or phone (or tablet) that you use for work, home office costs, and pretty much anything else you can think of that has to do with you getting to work and doing your job well.  I have not written down all of the things I deduct, but hopefully that gives you a good start.  This does not mean that these things are free.  As I said before, the amount you spend is deducted from your income so that you are only taxed on the money you actually brought home.  Just thought I’d throw that out there so you don’t all go to the next conference and spend all your money on sound massage chairs with reckless abandon.

Since this is more complicated when you have eight 1099-MISC forms instead of one 1040, use something like TurboTax (I’m not getting paid to advertise them) which will prompt you and let you adjust each item in each section as many times as you want.  You send in your taxes online and pay any additional taxes with a credit card.  It costs about $100.00 for the small business version (which you want if you are self-employed) and in my opinion, it’s well worth it to be completely in control of what you’re going to owe (because you’ll probably owe something – welcome to self-employment).  I have been convinced to look into getting a CPA to do my taxes.  They can sometimes catch deductions that you would have missed, but given the fact that most new professionals aren’t going to shell out $700.00 for tax preparation, TurboTax is a great alternative.  It prompts you and asks any questions you would be asked by a CPA, and they give you detailed examples of acceptable deductible items. Everyone has different preferences and priorities, and I have found TurboTax to be extremely helpful in the past.  Online filing and in-person tax prep costs are also deductible on the following year’s filing, so it’s mainly about having the money up front for tax prep if you want to hire a person to do your taxes for you.

Quarterly taxes:  If you don’t pay these, you could get a fine and that’s no fun.  There are small business forms online that allow you to calculate how much you will have to pay in taxes to your state government and the federal government, and the IRS separates that number by four.  You pay in April, June and September, and then the January of the following tax year, and it significantly decreases the chance that you will owe $4,000 to the government on April 15th of that year (In case it wasn’t clear, that statement comes from personal experience, unfortunately). This can be done online, at https://www.pay1040.com/ among other websites, and you can get more information on the subject at http://www.irs.gov/.  Each state is different, so contact your state’s treasury department for more information on estimated state taxes.

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This post is meant as a basic self-employment tax guide for beginners.  I am sure there is more to know about this subject, so in the meantime, if you have any additional information or suggestions for my readers, feel free to comment below.

In conclusion, the tax deadline this year is actually April 17th, since Washington D.C. has a holiday (Emancipation Day) on Monday the 16th.  I sure wish I could be emancipated from taxes.

Just this year, government?  Pleeeeeease?

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One Response to “Taxman”

  1. Anonymous said

    Find yourself an accountant who specializes in small businesses. You are missing out on MANY deductions, this is coming from someone who has been self employed for 16 years, and my husband is self employed as a freelance writer. Trust me, it will be worth it for you.

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