J.K. Lasser's Guide to Self-Employment

Barbara Weltman is an attorney and a nationally recognized expert in taxation for small businesses, as well as the author of many top-selling books on taxes and finance, including J.K. Lasser's Small Business Taxes and J.K. Lasser's 1001 Deductions and Tax Breaks. She is also the publisher of Idea of the Day(R), a guest columnist for WSJ.com and contributor to SBA.gov, is quoted regularly in major publications (including the New York Times, the Wall Street Journal, and Money magazine), and hosts Build Your Business radio. Visit her at www.barbaraweltman.com.

Acknowledgments ix Introduction xi Part 1 Self-Employment Basics 1 1. Being Self-Employed and On Your Own 3 What Does Self-Employment Mean? 4 Legal Consequences of Self-Employment 6 Practical Issues in Self-Employment 7 Tax Terminology 8 Being 1099ed 8 What's Ahead 9 2. Getting Set Up for Tax Reporting and Business Operations 11 Preliminaries 12 Keeping Books and Records for Tax Reporting 12 Business Reasons for Recordkeeping 15 Tax ID Number 15 Tax Year 16 Accounting Method 17 Decide Your Business Name 19 What's Your IP? 21 Obtain Licenses, Permits, and Permission 22 What's Ahead 23 3. Using Schedule C 25 Tax Filing on Schedule C 25 When, Where, and How to File 31 What's Ahead 32 Part 2 Reporting Income and Expenses 33 4. Reporting Your Income 35 Payment Types Don't Matter 36 Alternative Payments 37 Where to Report Payments 39 What to Do about 1099s 40 What to Do When You Don't Get Paid 42 Losses 42 What's Ahead 46 5. Writing Off T&E Expenses 47 Vehicle Expenses 48 Local Transportation 54 Business Meals and Entertainment 54 Business Travel 57 Business Gifts 59 Strategies for Saving on T&E Costs 60 What's Ahead 60 6. Deducting Office-Related Costs 63 Rental Expenses 63 Home Office Use 66 Materials and Supplies 75 Furniture and Fixtures 76 Computer-Related Costs 80 Insurance 82 Utilities 82 Miscellaneous Office-Related Costs 83 What's Ahead 84 7. Claiming Deductions A to Z 85 Advertising Costs 86 Bad Debts 88 Banking Fees 88 Casualty and Theft Losses 88 Charitable Contributions 89 Dues 91 Education Expenses 92 Impairment-Related Expenses 92 Interest 93 Legal and Professional Fees 94 Licenses and Regulatory Fees 95 Materials and Supplies 95 Moving Expenses 95 Payments for Outsourced Workers 97 Penalties, Fines, and Damages 98 Repayment of Income 99 Startup Costs 99 Subscriptions 100 Supplies 100 Taxes 101 Utilities 101 Checklist of Nondeductible Expenses 102 What's Ahead 102 8. Protecting Yourself with Medical Coverage and Retirement Savings 103 Medical Insurance 104 Health Savings Accounts 109 Tax Deduction for Health Coverage 111 Retirement Savings 112 SEPs 113 Solo 401(k)s 115 Pension Plans 117 IRAs 118 Roth IRAs 119 Strategies for Retirement Savings 120 What's Ahead 121 9. Taking Tax Credits 123 Business-Related Tax Credit 123 Personal Credits Arising from Business 126 What's Ahead 130 Part 3 Strategies for Your Business 131 10. Paying Your Taxes 133 Self-Employment Tax 133 Additional Medicare Tax on Earned Income 136 Additional Medicare Tax on Net Investment Income 137 Estimated Taxes 138 When You Pay Estimated Taxes 138 Sales Taxes 141 What's Ahead 142 11. Strategizing Year-Round for Tax Savings 143 Tax-Savvy Business Decisions 144 Year-End Planning 146 Post-Year Tax Elections 148 Lease Instead of Buy? 150 Don t Overlook Carryovers 150 Audit-Proof Your Return 151 What's Ahead 153 12. Strategies as Your Business Grows 155 Moving to Larger Quarters 155 Hiring Employees 157 Changing Legal Status 160 Selling the Business 161 Final Thoughts 162 Index 165