What Forms of Tax Relief are Available to an Independent Contractor?
Working as an independent contractor provides you with a lot of flexibility. You can create your own schedule, choose the work you want to do, and decide what a fair pay wage is. Unfortunately, filing taxes as an independent contractor isn’t always that easy. This is where hiring a tax relief specialist can make life easier. The following guide provides insight on a few ways a tax relief specialist can help you when filing taxes as an independent contractor.
Vehicle and Rent or Mortgage Costs May be Deductible
When you work as an independent contractor and use a portion of your home for business, that portion of your rent or mortgage is considered deductible. You need to have a space in your home that is designated for your work. The tax specialist needs to know how large the area is. This allows them to help you determine how much of a deduction is available. You don’t need to provide pictures that prove the size of the area, though.
If you have to use your vehicle to do your work, you may be able to deduct some of the costs. The IRS provides allows you to file for a deduction in one of two ways. You can choose to file a standard mileage deduction. It allows you to deduct a certain amount per mile that you travel throughout the year. If you travel a lot, this can be an easy way to save a lot of money when filing taxes.
The second option for filing for vehicle deductions is the actual cost deduction. This is complicated because you have to keep track of every dollar that you spend on the vehicle. This includes keeping invoices and receipts for everything, which can sometimes be difficult to do. This is a great option if you have numerous vehicles that need to be maintained. If you have numerous vehicles within your work fleet, you cannot claim the mileage deduction, and thus the actual cost deduction will be ideal. The tax relief agent can help you determine which option would be the most lucrative for you.
Advertising Costs May be Deductible
To have a successful business, you need to make your name known throughout the community. A great way to do this is through advertising. You need to keep track of how much you spend on advertising costs throughout the year. Advertising can include print, radio, television, and even social media marketing. If you had to hire a company to help set up a website, that might be a deductible expense. Be sure to get invoices for every form of marketing that you use. This allows you to prove the amounts you claim if the IRS selects your return for audit.
Cell Phone Costs May be Deductible
If you have to use a cell phone to do a majority of your business, you may be able to deduct a portion of the cost. If you only use the phone for business calls, the entire bill may be deductible. You have to be able to prove that the phone is used exclusively for work to claim this deduction, though. This can be done by putting the phone in the business name instead of your name.
Business Insurance and Supply Costs Are Deductible
Many businesses are required to have business insurance to operate legally. If you don’t have business insurance and are sued, you can lose everything that you worked so hard to obtain. The tax relief specialist can help you determine how to claim the appropriate deductions when filing your taxes. You need to be sure that the business insurance premiums can easily be distinguished from the other insurance policies that you have. Auto, health and disability insurances aren’t deductible from your taxes.
Any supplies that you need to do your job are completely tax-deductible. Business supplies can include things needed to keep your business clean, as well as paper, pencils, computers and even attire. The tax relief specialist can help you determine what costs count as business supplies and which do not. You’ll be surprised to see how many things are deductible. The best option is to keep all of the receipts for everything that you buy to run your business. This allows you to have proof of the money that you spent if something does count as a deduction.
You Can Deduct Charitable Donations from Your Taxes
Many small businesses choose to support the community by making charitable donations. This could be in the form of donating to a local shelter or sponsoring a youth team within your neighborhood. Talk to your tax professional about any donations that you have made recently. They can let you know if they’re deductible. The great thing about charitable donation deductions is that you can help others while also helping yourself.
Deductions Are Available for Depreciation of Assets
If you have equipment that you have been using for your business, it may have some wear and tear. If you do have some noticeable traces of putting that equipment to good use for your business, you can claim a deduction for their depreciation. There are specific guidelines that must be met to claim depreciation of assets deduction. Your tax relief professional will let you know if your computer, furniture, cars, or even tools can be claimed for depreciation of assets deduction.
Benefit Programs Can Be Deducted
If you have benefit programs available for your employees that you pay a portion or all of the cost of, the costs can be deducted for your taxes. You need to provide your tax relief professional with the information proving the amount that you pay. The agent will ensure that your health and medical costs are deducted on your form, though, to ensure that everything is as accurate as possible.
You Can Deduct Legal Service Costs
If you had to hire an attorney over the past year to create agreements or fight a lawsuit, those costs might be deductible. You need to provide your agent with documentation that proves when the attorney was hired. You also want to make sure they know when the attorney represented your business and how much they were paid in total for their services.
Food and Entertainment Costs
There are many times when you can deduct a portion of your food costs, as long as it was for business purposes. Certain stipulations need to be met, such as that business has to be discussed before, during, or after the meal. There also has to be at least one client at the meal for it to be deductible. The entire cost of the meal isn’t deductible. Only a portion of it can be deducted. Your tax professional can determine exactly how much of each meal is deductible. This ensures you save as much as you can when filing your taxes.
Contracted Labor Can Be Deducted
If you needed to hire someone outside of your business to do something for you, you could deduct their pay from your taxes. Many companies hire graphic designers to create their company logo or create a website for them. Your agent can help you make sure that you fill out the right forms when filing for this deduction. If you paid the person more than $599, a specific form called a Form 1099-MISC needs to be filed. The tax professional will know how to fill it out properly to make the process easier.
Maintenance Costs May Be Deductible
If you have to pay to have your business maintained, such as having the roof repaired, or plumbing addressed, the costs may be deductible. A tax relief agent can walk you through what is and is not considered a maintenance cost when you own a business. You need to be able to prove that the repair was necessary and how much it cost you to have it done. It’s best to hire professionals to do this type of work, rather than friends and family. This ensures that the IRS views the payment as a legitimate cost because a reputable company did the repairs.
If you are just starting a business, it’s a good idea to talk to a tax relief professional right away. The tax professional can walk you through all of the potential deductions that are available to you. You can then learn how to track all of the money that you spend properly. It can also help you to make decisions about what to spend money on and what to avoid purchasing.
Many businesses are required to file taxes quarterly at the state level. The tax professional can help you determine if that is necessary for you or not. If it is, then they can take care of the leg work for you. He or she can make sure that it’s completed accurately and turned in on time. The tax professional takes away all of the guesswork when it comes to filing taxes, so that you can focus on running your business.
Sources
//www.irs.gov/pub/irs-regs/depreciation_faqs_v2.pdf
//www.irs.gov/pub/irs-drop/n-18-76.pdf
