Issue link: https://www.massageandbodyworkdigital.com/i/72121
visit abmp.com If you're an independent contractor, you may have as many tax deductions as a business owner. and what's not, and everything else tax-wise that you need to know. You'll do yourself a favor by becoming familiar with it. CUT YOUR TAX BILL If you're preparing your own taxes, chances are that you're missing some vital tax deductions—at least enough to pay a professional to prepare your return for you. According to the law, "The legal right of a taxpayer to decrease the amount of what would otherwise be his taxes, or altogether avoid them, by means which the law permits, cannot be doubted."1 What is illegal is failing to file; even if you can't pay what you owe, don't fail to file on time. So what items are tax deductible? Basically, anything that facilitates the operation of your business is fair game. Some are relatively obvious: advertising, office supplies, rent, and utilities. Others may not be so obvious, especially if you don't consider yourself tax-savvy. For example, you're allowed to deduct gifts of no more than $25 per person that you give to staff members and/or clients. If you send out $25 gift certificates to your regular clients for Christmas, or on their birthdays, that's a deduction. So are client discounts; if you routinely or even periodically give $10 off to seniors, students, or others, that's a deduction. If you extended credit to a client and she moved away without paying you, that's a deduction. If you suffered damage to your property through theft or casualty, that's a deduction. Money spent on professional tax preparation is money well spent and deductible. If you're ever audited, most tax preparers will go to the audit with you to explain your deductions, although some may charge an additional fee for doing so. Tax preparation companies like H&R Block and Jackson Hewitt sell audit insurance for a nominal fee that guarantees their assistance with an audit. Bear in mind that if you're an independent contractor, you may have as many tax deductions as a business owner. For tax purposes, you're considered self- employed. If you're an employee, you may not have as many deductions, but chances are you will still have some business-related expenses, such as your license renewal fees, the cost of continuing education, liability insurance, and even expenses related to job hunting. KEEPING GOOD RECORDS The key to taking any and all of the deductions listed above is being able to document them. That means you must save invoices, receipts, and anything that can attest to the fact that the purchase of a service, product, or piece of equipment, was for business purposes. Many people are now running paperless offices. That's fine, but if you choose to do so, you'll need to scan all receipts and save them to your computer before shredding them. It's important to back up your financial records regularly in any case, but if you're running a paperless office, that practice is exponentially more important. You can use an online backup service, or save your files onto a flash drive or external hard drive, but the point is to do it frequently and consistently. The IRS agent doesn't want to hear you say, "I lost all my files." Failure to keep adequate documentation can cause disallowed deductions and cost you big bucks, including interest and penalties. If you're still using paper documentation, keeping that organized is not difficult to do, if you take the time to set up a system. My file cabinet contains hanging file folders with permanent plastic labels for each category. Each year, I drop an empty labeled file folder in the hanging file, and that's where my receipts go. At the Celebrate ABMP's 25th anniversary and you may win a refund on your membership. ABMP.com. 25