Tax season can be a stressful period for anyone, but especially for those who are adjusting to new employment or filing status circumstances. Independent contractors are one such group that can face a complex tax situation; their tax stress complexity can be compounded if they have taken on new clients or are filing as an independent contractor for the first time. It is important to remember that there are a diverse array of individuals who are responsible for the self-employment taxes associated with being an independent contractor, from those who pick up small freelance work to high-income consultants. To sort through all the intricacies of self-employment taxes, those with a self-employment situation of any degree of complexity are encouraged to contact a financial advisory firm offering Clifton NJ tax consulting services. Most importantly, a professional tax accountant will be abreast of any recent developments in the ever-changing tax laws and regulations. Not only will they be able to help ensure your compliance with the tax code, but a tax accountant will also be aware of the full range of tax deductions for which you may qualify. As a starting point, though, here are a few deductions that are relevant for the self-employed.
Home Office
Many people are vaguely familiar with the concept of the home office deduction but are not sure of the specific details. The basic concept is that there is a deduction available for the self-employed who use a home office. The home office doesn’t have to be a complete room with a massive office desk and swivel chair that is devoted entirely to day-to-day business operations. The home office deduction can be associated with any portion of your living space that is used as the main place where you do business; it can even be a separate structure from your house. This deduction is obviously intended to address the fact that those who are self-employed do not have the advantage of an office that is maintained by a business they are regular employees of. There are some other requirements of a space for it to qualify as a home office, including that it must be the only place where you perform the administrative duties of your business. The amount of the home office deduction is relative to the percentage of your living space that is used as an office for business.
Retirement Plan
Unlike business employees who may have a portion of their income taken out and placed in some form of retirement plan, the self-employed are responsible for their own retirement accounts. The good news is that there are a variety of retirement plan options available to the self-employed. Some of the most popular plans allow you to put in as much as a quarter of your self-employment earnings into a retirement account, as long as it falls under the maximum annual contribution which changes from year to year. There are also deductions associated with the money you save for retirement.
Other Deductions
Other self-employment tax deductions involve mileage, travel, health insurance coverage and hiring family members to work for you. For detailed information specific to your situation, contact a tax accountant in your area.