When you own a resume writing business, there are a lot of things to consider. One of them is taxes. It will take you a little longer to get them done than someone who is a W2 employee, but there is one upside — tax deductions for the self-employed.
When it comes to taxes, there is a lot to know. As a self-employed professional, things can get a bit more complicated because you work for yourself. When you work for a company, your wages are subject to taxes. You fill out a W-2 form and the company does the rest. You can see on your check what has been deducted for state, federal, and social security tax. It's a no-brainer for the employee. I'm jealous for some of my jobseeking clients when I think about the ease of getting a W-2 form. I'd have my taxes done when there is still snow on the ground in Nebraska if I were an employee!
But alas, I've been self-employed since 1996.
Most self-employed people receive their full pay for their services. Taxes are not taken out. This gives you an advantage when it comes to utilizing as much of your money as you can. But, tax time comes and it's time to settle up with the IRS. This involves calculating all of the income you've earned from clients, and then figuring out your tax deductions. Deductions in the form of tax write-offs can reduce your taxable income. This can change your tax bill.
Tax Write-Offs
Here are a few of the tax write-offs that you may be eligible to deduct as a self-employed individual. A full listing can be found on the IRS website. Turbotax also has a good list of possibilities for 2012. (Check with your tax professional for specific advice and guidance, of course.)
- Home office — This deduction has tripped people up for years. Basically, you will need a dedicated office space in your home for your business. Conducting business occasionally from your computer in the family room doesn't qualify that space for a tax write-off. But, when you have an office set up, you are also eligible to deduct a portion of the utilities too. (You calculate the total square footage of your home, and the square footage of your "office" and then can deduct expenses as the percentage of your office compared to the total home.)
- Travel expenses — Did you attend a resume writing conference this year? Time to pull together those records -- conference registration fees, airline tickets, meal receipts, gas receipts, and other incidentals. A percentage of these expenses are deductible because they were incurred in the transaction of your business.
- Medical expenses — Because you are not employed by anyone, your medical bills are your responsibility. However, you can regain some of the insurance premiums you paid on your tax return. The exception to this rule is when your spouse is eligible for family insurance at their job and this could cover your medical needs. Again, check with your tax professional. Also: Look into a Health Savings Account as a way to increase your deductions for expenses you're already paying.
If you travel to an area and, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.
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