Posted on Tuesday, 29th December 2009 by admin
If you are a small business owner, self employed, or have made a profit this year from freelance work, you may be dreading tax time. Running your own business is stressful enough without the worry of possible owed taxes. As 2010 approaches, here are a few steps you can take right now that will help lower your tax bill in April.
Purchase Business Equipment before December 31st
If you were planning on purchasing any new software or equipment for your business in the near future, consider making the purchase before the end of 2009 so you can benefit from the tax break.
Obviously you can write off the purchase of major equipment used for your business, such as your computer, printer, and copier.
Sometimes we don’t realize the full list of items that are deductable, and by leaving certain key expenses out, we can end up paying the IRS more money than they have a right to receive. Commonly forgotten items include monthly costs of your networking software, business cell phone lines, or VOIP services. If you pay a fee for the ability to connect with associates and clients with conference calls or virtual meetings, these fees should all be written off as business expenses.
Opening a 401(k) Account
Opening a special small-business retirement account will allow you to lower your taxable income now and save money tax-deferred for the future. Doing so is one of the best ways to save on taxes and reward yourself in the long run. The top two choices for saving are a Simplified Employee Pension (SEP) or a Solo 401(k)
A Solo 401(k) may be your wisest choice if most of your income comes from self-employment. You can contribute up to $16,500 to a Solo 401(k) in 2009 plus an additional twenty percent of your net business income right off the top, up to a maximum of $49,000. Are you over fifty years old? If so, you can make a “catch-up” contribution of $5,500 as well.
Of course you aren’t allowed to contribute more than your total small business income, but even if you only earned $16,500 from freelancing or self-employment, you are allowed to contribute this whole amount to your Solo 401(k). You’ll need to open your Solo 401(k) by the last day of 2009, but you will have until April 15, 2010, to make your contributions.
Start Getting Ready Now
Don’t miss out on deductions because you’ve procrastinated and have to scramble to gather your information together in April. Now is the time to look at your Schedule C and make a list of your deductions. Do you have your log together for business travel, lodging, tolls, parking fees, and the cost of business meals?
If you work from a home office, you can also write off part of your mortgage or rent, as well as a percentage of you utilities. IRS Publication 587, Business Use of Your Home, will help you with this deduction.
Self-employed individuals can also claim health insurance premiums paid for themselves and any dependents who were not eligible to participate in any other health plan. IRS Publication 535 will give you instructions for this one.
In order to take advantage of every tax saving that is available to you, it’s best to stay as organized as possible and start now. By starting as soon as possible, you will be able to tackle your taxes a bit at a time, without stressing yourself out. If you’ve fallen behind or haven’t kept proper records, do the best you can this year, but make it a priority to purchase a solid record keeping software to avoid the same problems when next tax season rolls around.
Similar Posts:
- Different Types of Business Taxes
- Challenges and Goals of Cash Management for Businesses
- All About Equipment Leasing
- The True Costs of Starting Up a New Small Business
- 3 Easy Small Business Costs Savings Ideas
Posted in Business News | Comments (0)