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

What every self-employed person needs to know about their taxes!

If youre self-employed, chances are the majority of your time is spent finding new customers or clients, servicing existing ones, and handling each and every aspect of your business. Freelancers, independent contractors, gig economy participants, and other individuals working for themselves need to be aware of their responsibilities when it comes to paying their taxes. Even if you have an accountant or use tax preparation software, you may not be aware of all the deductions and credits you are entitled to. Thats where the experts at J.K. Lasser come in.

The second edition ofJ.K. Lasser's Guide to Self-Employmenthelps you file your taxes correctly, accurately, and on time. Using clear, jargon-free language, this bestselling guide explains the legal and financial implications of self-employment and shows you how to keep as much of your hard-earned money as legally possible. You will learn the essentials of tax reporting and see what types of valuable tax-saving deductions and credits you can claim. Fully updated to reflect changes in the tax code, this new edition features practical examples, easy-to-use worksheets, real-world tips, expert advice, and much more. A must-have resource for anyone who fills out a Schedule C at tax time, this book:

• Offers effective strategies for reducing your tax bill and increasing your cash flow
• Presents a detailed overview of the Schedule C that explains when, where, and what to file
• Explains how to protect yourself on a tax-advantaged basis with insurance, health coverage, and retirement plans
• Features advice on growing your business through technology and education programs
• Provides new and updated information on the qualified business income deduction, getting certified for government contracts, recent legislation that protects freelancers, and more

Dont let being a solopreneur and filing your taxes be a source of stress and anxiety for you and your business.J.K. Lasser's Guide to Self-Employment:Taxes, Strategies, and Money-Saving Tips for Schedule C Filersis here to help.

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, includingJ.K. Lasser's Small Business Taxes andJ.K. Lasser's 1001 Deductions and Tax Breaks. She is also the publisher ofIdea of the Day®, a guest columnist for WSJ.com and contributor to SBA.gov, and is quoted regularly in major publications (including theNew York Times, theWall Street Journal, andUSA News). Visit her at www.BigIdeasforSmallBusiness.com.

Preface 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 9

Whats 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 14

Tax ID Number 14

Tax Year 17

Accounting Method 17

Decide Your Business Name 20

Whats Your IP? 21

Obtain Licenses, Permits, and Permission 23

Whats Ahead 24

3. Using Schedule C 25

Tax Filing on Schedule C 25

When, Where, and How to File 30

Whats Ahead 31

Part 2 Reporting Income and Expenses 33

4. Reporting Your Income 35

Payment Types Dont Matter 36

Alternative Payments 38

Where to Report Payments 39

What to Do about 1099s 40

What to Do When You Dont Get Paid 42

Losses 43

Whats Ahead 46

5. Writing Off Vehicle, Travel, Meals, and Gifts Expenses 49

Vehicle Expenses 50

Local Transportation 56

Business Meals 56

Business Travel 59

Business Gifts 61

Strategies for Saving on Travel Costs 61

Whats Ahead 62

6. Deducting Office-Related Costs 65

Rental Expenses 65

Home Office Use 68

Materials and Supplies 79

Furniture and Fixtures 80

Computer-Related Costs 84

Insurance 86

Utilities 86

Miscellaneous Office-Related Costs 87

Whats Ahead 88

7. Claiming Deductions A to Z 89

Advertising Costs 90

Bad Debts 91

Banking Fees 92

Casualty and Theft Losses 92

Charitable Contributions 93

Dues 95

Education Expenses 96

Impairment-Related Expenses 96

Interest 97

Legal and Professional Fees 98

Licenses and Regulatory Fees 99

Materials and Supplies 99

Moving Expenses 99

Payments for Outsourced Workers 100

Penalties, Fines, and Damages 101

Repayment of Income 102

Startup Costs 102

Subscriptions 103

Supplies 103

Taxes 103

Utilities 104

Checklist of Nondeductible Expenses 104

Whats Ahead 105

8. Protecting Yourself with Medical Coverage and Retirement Savings 107

Medical Insurance 108

Health Savings Accounts 111

Tax Deduction for Health Coverage 113

Retirement Savings 114

SEPs 116

Solo 401(k)s 118

Pension Plans 121

IRAs 121

Roth IRAs 122

Strategies for Retirement Savings 123

Whats Ahead 124

9. Taking Tax Credits 127

Business-Related Tax Credit 127

Personal Credits Arising from Business 130

Whats Ahead 134

10. Claiming Your Tax Bonus 137

General Rules 137

Limitations 138

Specified Service Trades or Businesses 139

Whats Ahead 140

Part 3 Strategies for Your Business 141

11. Paying Your Taxes 143

Self-Employment Tax 143

Additional Medicare Tax on Earned Income 146

Additional Medicare Tax on Net Investment Income 147

Estimated Taxes 148

Sales Taxes 152

Whats Ahead 153

12. Strategizing Year-Round for Tax Savings 155

Tax-Savvy Business Decisions 156

Year-End Planning 158

Post-Year Tax Elections 160

Lease Instead of Buy? 161

Dont Overlook Carryovers 162

Audit-Proof Your Return 163

Whats Ahead 165

13. Strategies for How to Grow 167

Getting Certified 167

Getting a Mentor 168

Outsourcing 169

Using Technology 170

Continuing to Learn 170

Whats Ahead 171

14. Strategies as Your Business Grows 173

Moving to Larger Quarters 173

Hiring Employees 175

Changing Legal Status 178

Selling the Business 180

Final Thoughts 181

Index 182