If you run your own business or plan to do it, you need to know all you can about tax deduction, which can save you a lot of money if you do. Many of these benefits of tax reduction are only available if you are self-employed and not if you are employed by someone. All you have to do is enter your own personal identification number as your business tax identification number and then make sure you file under a Schedule C or Schedule C-EZ and that you are ready to start taking advantage of the deduction.
However, there is a difference between Schedule C and Schedule C-EZ and the benefits they can give you in terms of taking advantage of self-tax deduction. The EZ form should only be used by those who have a lesser amount of money and end the year with a significant profit. A few other things in terms of taking advantage of the reduction using the EZ form are that you have to be a company without any employees, one who has no reason to claim deductions at home office and will not report any depreciation. If you qualify for these, you will need to use the EZ form, otherwise you will only need to use Schedule C to make the most of the tax reduction. Basically, with a Schedule C you can report a loss, otherwise you cannot.
Let’s look at what you can claim using the self-employment tax credit. First, you require equipment costs under what is called Section 179. Under this section, you require all equipment purchased that year. There may be a limit to the amount that tends to change a lot, so look at Internal Revenue Service’s publication number 946 to help you figure out the exact limit.
You may also require travel during the tax reduction. This includes mileage and percentage of meals and entertainment purchased. As long as you keep good records and your receipts, you would well claim this. You must also remember to keep this within the boundaries of business-related expenses.
You can also include health insurance, social security taxes and self-managed retirement benefits in your self-employed tax deduction. This means that you can include any premiums for yourself or family members as well as a certain amount of the payment you make on Social Security tax, in any claim you may make to qualify for the deduction. The only problem is that you Social Security application is only on Form 1040 and not Schedule C. As for the self-managed retirement benefits, as long as you open a Keogh or a simplified employee pension and make any contribution you may make to these plans. This can also only happen on Form 1040. But it is worth the savings you can claim on deductions.
One last thing you may require during self-employment is when it comes to a home office. Whether you use the office for file storage and bookkeeping, or if you don’t spend a lot of time there, you can still claim this as part of your self-service tax.
As you can see, when it comes to claiming and receiving the benefits of being self-employed it is well worth it. As long as you keep careful and accurate records, you can take full advantage of the reduction.