Tax Mistakes 90% of Self-Employed People Make

Tax Mistakes 90% of Self-Employed People Make
Author: Tyler Martin, CPA
Copyright: 2004

Let me share a short story with you… A self-employed
friend of mine came into may office the other day to have me
do his taxes. He has been doing his taxes using a software
program for years. In the past, he did his own for 2
reasons: one it is cheaper and 2) he likes to spend a
weekend going through his accusation.

Every year he usually asks me a few questions about his
taxes and I usually can tell he is fairly confused but since
he is a friend I am not going to preach to him about having
a professional do his returns.

So back to the story, when he came into my office, he no
longer wanted to waste his weekend going through hi! s
information and was feeling a little less positive as the
IRS has sent him a letter encircling something he did improperly on
his tax returns.

Well, I did a review of his previous year’s returns and after
spending 15 minutes with him discovered several deductions
he had missed. Consequently, he was overpaying his taxes for
years. To add salt to the wounds, the missed deductions by
far outweighed the cost of my preparation.

I wish I could say this is a unique story but it is not. In
fact, most new clients that come into my office typically
have missed deductions. The reasons vary and in some cases
it is not just the software prepared returns — sometimes
people have paid tax professionals to help them miss
deductions.

The point of this member is to highlight common deductions
that self-employed people miss. This article obviously can
not include everything but hopefully it will cover the
deduction! s that are easy to miss. This article is not a
substitute f! or profe ssional guidance.

I have compiled the following list of deductions
self-employed people typically miss. Now keep in mind, there
are various rules involved with taking these deductions so
make sure you understand the rules before you start
deducting.

Advertising and Promotion - this includes media, internet
and any other advertising that promotes your walk of life. This
would also include novelty items such as coffee cups,
t-shirts and pens with your company name on them.

Dues and Subscriptions - This would includes magazines and
periodicals that are necessary for your business.

Licenses and Permits - If your city requires a business
license this would be deductible here.

Internet Fees - If you use the internet for your business or
have a web page, in that place is a good chance some or all of the
internet costs are deductible.

Cellular and Telephone Expense - The calls for dealing
purposes are all ! deductible.

Office Supplies - Office supplies used for your business are
deductible.

Meals and Entertainment - Do you take clients out to lunch
or dinner and discuss business with them? If so, 50% of this
cost is deductible.

Travel - Business related tour is take outible.

Auto Expenses - There are couple of ways you can deduct your
auto expenses. The minutiae are beyond the room of this
article but vocation auto expenses are deductible.

Electronic Equipment - Equipment such as computers, cellular
phones and palm pilots all can be partially or fully
deductible.

Outside Services - Costs related to your calling such as
tax and accounting help or any other guidance is typically
deductible.

Let me add one more item, if you are newly self-employed
person, you may not be aware that you will be responsible
for a new tax. It is called self-employment tax. It can add
to your tax bill quickly, so make! sure you understand how
the tax is computed and plan your ! cash flo w accordingly.

In closing, next time you think here and there your taxes, make sure you
feel comfortable not only preparing the returns but also
planning for the tax. If not, hire a qualified professional
and you will feel better knowing your are not overpaying
your taxes.

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Tyler Martin is a Certified Public Accountant with a
practice in San Jose, California. He provides tax and
QuickBooks guidance to individuals and business owners. For
more information about Tyler and his practice go to:
www.4cpa.biz.
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