Running a one-person business? Tired of the huge hit you take at tax time? Want to save money on your accounting and taxes? Consider these simple tips and tricks

Tip 1: Use an accounting system

Oh sure. This sounds obvious. But unless you have a decent way to track both your income and your deductions, you not only won’t know how much money you’re making until tax time, you’ll also miss or forget about tax deductions.

Something like Quicken or Microsoft Money will work just fine. If you need more bookkeeping horsepower than these checkbook programs provide, look at stepping up to QuickBooks or Microsoft Small Business Accounting.

Tip 2: Don’t Incorporate

New business owners often rush to incorporate. But incorporation rarely makes sense for small businesses. And incorporation totally complicates your taxes and accounting.

What’s a new business owner to do? Form a limited liability company instead. A limited liability company, or LLC, gives you all the same liability protection. But without the tax complexity of a corporation.

An LLC with just one owner, for example, gets treated for income tax purposes as a sole proprietorship. Which means to report your business activity to the IRS or state revenue folks, all you do is file a simple, one- or two-page schedule with your regular individual tax return.

Tip: Consider hiring your kids

If you have minor children and they help you out in your businessdoing real workconsider hiring them. As long as they earn less than $5,000, they won’t pay any income taxes on their wages nor any payroll taxes. Yet, you’ll still get to write-off the amounts you pay them as business expenses. (This might be a neat way to save for a kid’s college expenses.)

Tip 4: Consider hiring your spouse

While medical insurance is a deduction for income-tax purposes for sole proprietors, you can save far more in taxes by hiring your spouse and then setting up what’s called a Section 105(b) plan. Such a plan lets you treat all of your family’s medical expenses (insurance, out of pocket, deductibles and so on) deductions for both income tax purposes and self-employment tax purposes.

If you are interested in this, confer with a local tax practitioner. Section 105(b) plans can be a little tricky to understand if you haven’t used them before.

Tip 5: Take the home office deduction

Hey, if you regularly and exclusively use some portion of your home for your business, go ahead and take the home office deduction.

Don’t worry about this deduction being an audit flag. Or a hassle. The deduction is meant for people like you.

Tip 6: Set up a pension plan

If you want to save more than a regular IRA allows, set up a pension plan for your business. You can easily set up something like a SEP-IRA which will allow you to contribute up to twenty of your profit to a tax deferred account.

Example: If you make $50,000, you could use a SEP-IRA to contribute $10,000 to your pension account. And there are other good low-cost options available, too, such as SIMPLE-IRAs and one-person 401(k) plans.

To get more information on small business pension plans, contact the Vanguard Group at www.vanguard.com or Charles Schwab at www.schwab.com.

Tip 7: Learn and then use TurboTax or TaxCut

A final tip: In most cases, the taxes of sole proprietorship are pretty simple. So, rather than come to someone like me (a CPA) or an enrolled agent or one of those nationwide tax preparation firms, try doing your return yourself using tax software.

Programs like TurboTax and TaxCut work great for simple-situation sole proprietors.

Seattle CPA and financial planner Stephen L. Nelson CPA is the author of Quicken for Dummies and QuickBooks for Dummies. Contact him at http://www.stephenlnelson.com

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Haven’t done your taxes yet? No problem. Now there is a
new way you can use top tax software programs, like
TurboTax and H&R Block, to get your taxes done quickly and
easily. And the best part is it won’t cost you a thing.

The secret is an IRS program called Free File, that allows
you to prepare and file your federal tax return
electronically, using these and dozens of other popular tax
software programs, for free!

Free File has been around for a few years, but it used to
have very stringent income requirements (i.e., only
taxpayers whose incomes were below a certain level could
use it). This year is the first time the service is being
opened up to 99% of taxpayers.

Important: You must go through the IRS official web site in
order to get this deal. Go to http://www.irs.gov and click
on the link at the top of the home page that says Free
File. (Note: It’s not on the navigation bar. It’s on the
home page itself.)

Next, you’ll want to click the gray button at the bottom of
the page that says, “Start Now.” At this point, you’ll
have the option of browsing all of the services offered or
choosing to use the “Guide Me to a Service” wizard to help
you select one. The wizard will ask you a few basic
questions about your age and income and then come back with
a list of companies whose free products meet your needs.

Why is the IRS doing this? In a nutshell, to save money.
It’s cheaper, faster and easier for them to process returns
electronically.

Why should you do it? Because it’s cheaper and easier to
file, and you can get your refund faster.

Why are the big tax companies offering this deal? They’re
trying to get you to upgrade to one of their deluxe
products, which offer things like tax planning advice, the
ability to import data from software you used last year,
etc.

Also, state tax programs are not included in this deal. So
the companies probably figure that if you use their free
federal program you’ll end up buying their state one.

Remember: You must go through the IRS official web site in
order to get this deal. If you go to the tax companies’
sites, you will not get this offer. In fact, some of these
companies not only charge you to do your return online, but
then they’ll also hit you with a fee once you try to file
electronically. So you’ll pay twice if you don’t go
through the IRS web site.

Happy tax preparing!

Stephanie Gallagher reveals her closely-guarded shopping
secrets in her ezine, The Shopping Mom’s Weekly Tip. Click
here to get the eCookbooks Recipe Sampler Cookbook as a
special gift when you subscribe: mailto:
theshoppingmom@aweber.com

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If you find yourself dreading the brown envelope with your self assessment tax return form coming through the post you are certainly not alone.

Millions of people feel the same way as you and go through the same laborious process year after year. It is one of the most time consuming and futile exercises that there are. Add to that the fact that you feel be grunted having to give your hard earned cash away anyway.

Not only this, but the forms are boring and confusing. Even having read the personal tax return guide numerous times it is still not clear and seeing as it isn’t the right time to complete the form (it never is) it gets put away. Your tax return self assessment form usually ends up on top of a pile of bills that gets hidden and then lost in the weeks leading to the tax return deadline!

With resentment you frantically fill in your form just in time. Then you realise that your calculations are slightly out, a genuine mistake that you will get penalised for.

Companies specialising in tax returns have come about to relieve the tormented tax payer. They offer expert tax advice, personal financial planning, self assessment preparation but most importantly they will fill in your tax return assessment forms for you. What is more your dedicated personal tax advisor will guide you and assist you all the way. This not only saves time, effort, and paper work but guarantees that your calculations are right without the hassle.

Here is a good site if you need assistance with filling in your tax returns. They are really helpful and have helped many people. http://www.cus4taxreturns.co.uk/

Keith Bateup works for a UK company called The Media Slice Ltd who specialises in putting people in touch with useful services such as loans, mortgages and pensions.

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