Tax Service For Self-Employed
In Phoenix, Arizona

Self-employment isn’t an easy route. It takes a lot of hard work, careful planning, and effective execution in many different aspects. Going into self-employment does not include any guarantee of success. In fact, nearly two out of every three new businesses fail within five years. Despite the negative reports, self-employment or starting a business remains an ambition that continues to be pursued by many individuals. 

Many factors cause a small business to fail and inadequate management, ineffective business planning, and poor financial management top the list. Tax management also plays a crucial factor in the chances of a business succeeding. A lot of self-employed individuals make common mistakes in keeping their tax records, filing, and claiming deductions. 

Mistakes happen. Running a business could be demanding and keeping a flawless record may be impossible. As a business keeps reaching higher levels of success, the tax filing process gets more complicated which leads to more opportunities for mistakes. Filing taxes every tax season does not have to be a source of stress. A little work throughout the year or professional help from a self employed tax preparer in Phoenix will make tax filing easier every year. 

Common Mistakes Made by the Self-Employed During Tax Season

• Inaccurate income report – On the lighter side, 20% of the underpayment may be imposed as a penalty. In a worst-case scenario, misreporting and under-reporting or over-reporting income may lead to an IRS audit. Or, in an even worst-case scenario, it may lead to fraud charges. 

Whether it is an intentional or an accident mistake, it is best to keep away from making this mistake. By keeping a good record, or best, hiring a tax accountant to handle your tax reports will help you account for everything and avoid any possible misreports.

• Mixing personal and business expenses and Poor record tracking  – The IRS demands a clear demarcation between personal expenses and business expenses. An inaccurate expense deduction can draw your taxes into question. 

Maintaining separate accounts and credit cards for business and personal expenses will make it much easier to track deductible expenses. 

• Not hiring a tax professional – working with a self-employed tax preparer in Phoenix will give valuable benefits to your business’s financial aspects. Proactive tax planning may help you lower your overall tax liabilities and maximize tax deductibles. 

• Not saving for tax – Unlike the traditional employees that pay a portion of their annual tax every paycheck, self-employed individuals pay their tax in full when the tax month comes.

Setting aside a percentage of everything you make as you earn it and putting it on a separate tax money savings account will help you ensure you’d have the money when the tax filing comes.

• Missing out on deductions – Throughout the years, tax deductions and benefits for self-employment has been passed by legislators. One common reason self-employed individuals miss on their deductions is that they don’t want a careless deduction to cause tension with the IRS. But, that is not an excuse to miss out on deductions you should take.

This is where professional self employed tax preparers in Phoenix come very important. A tax professional can walk you through your expenses to determine what is or isn’t eligible for deductions.

Tax Deductions and Benefits for the Self-Employed

• Self-Employment Tax – Self-employment tax is a tax-deductible expense. The Self-employment tax is a tax for Social Security and Medicare taxes primarily for self-employed individuals including freelancers, independent contractors, and small-business owners. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. 

• Home office deduction – Self-employed individuals are eligible for a home office deduction. The home office deduction can save you taxes. It allows you to deduct a part of your rent or mortgage payments, utilities, and other home expenses.

• Internet and Phone Bills – Your computer, cell phone, Internet service, are possible tax deductions only if it is used to run your business. 

• Health Insurance Premiums – Self-employment or having a business is a dream for many but one of the downsides of being self-employed is that you don’t get the health insurance benefits that traditional employees do. It means that you buy your health insurance. The good news is, you can deduct 100% of your health insurance premiums from your taxes. 

• Meals – A meal is a tax-deductible expense only when the event is for business. Examples are when you are traveling for business, at a business conference, or entertaining a client. There are limits to what sorts of meals you can deduct, and only 50 percent of any of the meal expenses is allowed to be deducted.

However, the Consolidated Appropriations Act, 2021, H.R. 133 bill temporarily allows a full deduction or 100% deduction for business-related meals as long as the expense is for food or beverages provided by a restaurant. 

• Travels and Vehicle Expenses – As long as the travel is for business purposes, self-employed individuals are eligible for the travel expense deductions. As for vehicle expenses deductions, the key is to keep excellent records of the date, mileage, and purpose for each trip. 

• Publications, and Subscriptions – Yes, subscriptions and publications are tax-deductible. As long as they are directly and essentially related to your business. 

Most self-employment tax deductions are complex and there are more deductibles available than the list above. These self-employed tax deductions may give huge benefits to your business. The sad reality is, many self-employed individuals are not utilizing these benefits and tax deductions as they are unsure and they see tax professionals as just another additional expense. Paying for a professional self employed tax preparer in Phoenix with intensive trainings and knowledge on taxes is nothing compared to the promising benefits it may bring to your business.