Self-Employment and the Tax Man: 6 Ways to keep yourself out of Trouble

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    Getty/William Andrew

    Once upon a time and not too long ago bad financial management use to
    only mean bad credit. Now not managing your finances can cause many
    issues including loss of employment, bankruptcy, foreclosure, and even
    jail! More specifically we’ve seen many celebrities fall victim to
    jail time for not paying their taxes. Ron Isley from the legendary R&B
    group the Isley Brothers spent 3 years in prison while Wesley Snipes
    has just begun his bid. Other celebrities in tax trouble include Lil
    Wayne, Snoop Dogg, Doug E. Fresh, Wyclef, Toni Braxton, Ruben
    Studdard and the list goes on. The main reason we are seeing more
    people fall into tax troubles is because new technology has made it
    easier for those who are self-employed to take their business matters
    into their own hands. While managing your own business matters may cut
    cost in the short run if you are not well versed it may cost you more
    than just money. Whether you work 9-5 and have a side hustle or you
    are a full-blown entrepreneur the following are tips that every
    self-employed persona needs in order to keep themselves out of trouble
    with our dear old Uncle Sam.

    1. Keep very good records: Most large companies rarely ever have
    issues with taxes because they hire accountants and financial officers
    to oversea most of their spending. Because you are a one-stop shop it
    is important that you keep good records and save all receipts so that
    you can support your deductions.

    2. Use your deductions wisely: Again make sure that you are keeping
    your receipts for everything! Obviously you should deduct anything
    is used to conduct your business such as business travel, office
    supplies, postage and shipping costs, dues, subscriptions, and
    anything else business-related. Don’t forget your office space;
    whether you have a separate office or use space in your home you are
    able to deduct either the rent you pay for your office space or a
    percentage of your rent or mortgage from your home relative to what
    you use for your business. You are also able to deduct child-care,
    phone bills, and utilities.

    3. Defer income if necessary: Being self-employed gives you the
    flexibility as to how or when you pay yourself. If you notice that you
    are beginning to reach a higher tax bracket it is wise to hold off on
    paying yourself or adding income to your books.

    4. Increase expenses if necessary: Just as you can choose to defer
    income, if you see that your income is high, you can make many more
    year-end business purchases to increase your deductions.

    5. Get the right help: Not all tax experts are created equally. Make
    sure you ask for help from someone who has experience working with
    self-employed taxes!

    6. File on time: The worst thing you can do is not report your taxes.
    Make sure you are filing your taxes on time and if for whatever
    reasons if you need more time to file make sure you file an extension

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