Self Employed, things I should keep in mind?

Question

I started a onsite computer repair business in Florida, what are something I should do to help with taxes and taxes deductions? Ovious anwsers and tips are welcome so I can compare to what I have done already, Thanks

Answer 1

pay your taxes quarterly (this is a must do). Tax dedcutions milage your "home oiffce dedicated to it" if they are still in business SED in Atlanta Georgia treated me very well when I had my business with computer parts. Make your rates affordable ($95 for a laptop screen install is insanity) and good luck.

Answer 2

The two most important things:

1. Remember the 15.3% Self Employment tax. This bites many new business owners squarely in the backside and can be a sink-or-swim issue.

2. Make your quarterly estimated tax payments on time. Income tax is due when the income is earned, not on the filing deadline. If you do not pay in enough during the year you will be assessed penalties and interest for undepayment of estimated taxes.

Beyond that, a common pitfall is the Home Office Expense. The rules are very strict on this and it is an audit trigger. If you play by the rules you have nothing to fear from an audit of it, but if you don't it will get very expensive very quickly.

Answer 3

I like Bostonian's answer, but I'll elaborate somewhat on that. The self-employment tax is on the net profit, not the gross. Keep all receipts, whether paid in cash or whatever. Here are some expenses you'll want to keep track of.

Advertising, including business cards and promotional items like key rings, etc.

Business mileage, but remember that the miles from home to the first stop of the day and from the last stop back home are considered commuting. Also, you'll need to have a record of the mileage on the vehicle you're using as of January 1st and December 31st, so you can calculate the total miles put on the vehicle for the entire year, break out commuting and other mileage, and show the business mileage. I like to use a pocket calendar for this, and just tally business miles weekly or monthly. Also, you can use the standard mileage rate or actual expenses but not both. In the first year of business, it's wise to use the standard mileage rate because after that year you can choose which one gives you the best result and switch between the two. But if you use actual expenses in the first year, you are locked into using actual expenses from then on. (One of our government's quirky rules.) If you use actual expenses, don't forget car washes and registration and inspection fees, and repairs.

Depreciation on equipment and software--I assume you're using diagnostic software of some kind. You have an option of expensing some things off the first year or using depreciation to spread the cost over several years. Also there is a special first-year exclusion of additional depreciation, if you choose to use that.

Tools

Office supplies

Postage and delivery

Contract Labor

Wages, if you have any employees

Rental or lease of vehicles or equipment

Professional fees and commissions

Don't forget the fees for your DBA papers filed with the county

Employer taxes, if you have employees

Sales tax you collect from customers and pay to the state isn't really included in income and so isn't a deduction.

Uncollectible debts

Supplies, computer parts, etc.

Business use % of a cell phone--keep a log of time used

Business use % of a computer--keep a log of time used

When you do your taxes for next year, don't forget to carry the profit from the bottom line of the schedule C to the schedule SE or SE-EZ, and don't forget to make an adjustment to your income (on the front of the 1040) for 1/2 of your self-employment tax.

Keep all of your records for 10 years. Yes, I know everybody else says 3 years. But if you're ever audited, and they decide to, they can go back as far as 10 years, and forward as far as 10 years. Also, if you have employees, keep all of the time sheets, time cards, w-4 forms, w-2 & w-3 forms... and any other employee-related forms for 10 years, too.

Keep records of any buildings or real estate you own and use for business until after they're sold. Also keep any investment records, so you can show the original cost or original amount of the investment if it's needed.

Estimated taxes aren't exactly paid quarterly. The first quarter one for the year is in the middle of April, second is mid-June, third is mid-September, and the last one is mid-January. You can download a pdf version of the forms from www.irs.gov.

Hope this information is helpful.

Answer 4

The IRS gives some great guidelines, and they are the ones you want to please.

Basically

pay for everything with a credit card or check, never cash

make a daily log of all business activity, meals and travel, everything

incorporate or become a LLC

do the things that legit business do, get business cards, company check book, join an association

when you make a mistake that losses money, make a note to self, and what you did to see it did not happen again.

keep track of inventory,

make a separate room in your house for JUST business

Record all income And where it came from always deposit in company checking account.

Answer 5

Keep very good records, and keep receipts for any expense connected with your business so you have backing for your deductions.