Simply Junior

With the recession and surging unemployment swelling the ranks of people reinventing themselves, millions of taxpayers are setting up home-based businesses and providing their services as self-employed independent contractors. Whether your new self-employed independent contractor status is a temporary measure or part of your long-planned road map to fortune and glory, there are tax dangers (plus surprisingly lucrative income tax relief) that should grab the attention of every self-employed independent contractor.

We know the IRS is targeting self-employed independent contractors. The government estimates that 85% of the $345 billion tax gap is due to self-employed individuals – freelance professionals and independent contractors who don’t get a 1099 the way large business employees do. Being a self-employed independent contractor means you’re the boss, unfortunately it also means you’re the one on the hook for any problems with back taxes. How you handle your back tax problems will not only determine whether your business will succeed, but it also carries the real threat of jail time if you get it wrong.

To learn more ways to legitimately maximize deductions while avoiding IRS problems, check out Part 2 of this series on Tax Help Tips for Saving Money on Taxes for Freelance Professionals and Self-Employed Individuals.

Read on for my best year-end tax help tips to show self-employed independent contractors how to get the biggest income tax relief possible.

Year-End Income Tax Relief Tip #1: Did you owe back taxes because you made a mistake in your quarterly estimated taxes? If you’ve spent your life working as an employee, you may be delighted that the first money you receive as a self-employed independent contractor is a flat fee without any taxes taken out. But your joy should be short-lived, this is a case of the taxman being delayed but not denied.

Contact a tax attorney to make sure you have structured your business correctly. If you haven’t gotten tax help from a tax attorney yet, there is still time to structure your business to get the maximum income tax relief before the year end. (After that you’re stuck with your mistakes. Well, mostly. A good tax attorney or tax resolution specialist can still get you out of back tax trouble, but the best approach is to avoid owing back taxes in the first place.)

Year-End Income Tax Relief Tip #2: Are YOU really a self-employed independent contractor? Many businesses (large and small) mislabel their employees as “self-employed independent contractors” to get income tax relief and sidestep a host of state and federal laws. If your boss has you misclassified as a self-employed independent contractor and you file as one, you could be in a heap of trouble when the IRS comes knocking on either your door or your boss’s door to collect back taxes. Suddenly, all those lovely deductions go out the window and your tax bill explodes. If you feel your boss has misclassified you as a self-employed independent contractor, contact a tax attorney or tax resolution specialist immediately for some self-employed independent contractor back tax help before the year ends.

Year-End Income Tax Relief Tip #3: Are your subcontractors really self-employed independent contractors or are THEY employees? While you may be a true self-employed independent contractor, you need to establish whether your subcontractors are self-employed independent contractors or employees. According to IRS Summertime Tax Tip 2009-20, “the cost of misclassification to employers in additional taxes, as well as administrative time, or the loss of tax-favored status for employee benefit plans, can be steep.” If you’re not sure, contact a tax attorney or tax resolution specialist to get tax help immediately.

Year-End Income Tax Relief Tip #4: Want to get income tax relief on your 2009 self-employed independent contractor work by delaying paying taxes until 2011? For a host of income tax relief reasons, a self-employed independent contractor might want to defer getting paid until next year. If you did work in 2009 but don’t want to pay 2009 taxes on it, simply wait to invoice your clients until January 1, 2010. This 2009 income tax relief technique is perfectly legal for self-employed independent contractors as long as you pay taxes on that income in your 2010 tax return.

Year-End Income Tax Relief Tip #5: Get that root canal before New Year’s. The secret to income tax relief is just like the secret to great comedy…timing. A self-employed independent contractor’s medical expense deduction is limited to 7.5% of the self-employed independent contractor’s adjusted gross income. If you haven’t reached that cap yet, go have those dental procedures or that bit of elective surgery (we’re not just talking about that nose, the swimsuit season will be here again before you know it). As long as you’re under that 7.5% limit, you can get income tax relief from your standard variety medical expense deductions. A little known year-end income tax relief tip – you don’t even have to pay for the medical procedures before January 1, 2010. Just put the medical charges on plastic and pay the minimum balance. As long as you had the procedures in 2009, the deduction is good. If your medical expenses are already over the 7.5% level of your self-employed independent contractor’s adjusted gross income, you should delay breaking your leg until January 1st, 2010.

Year-End Income Tax Relief Tip #6: Pay your state taxes before the ball drops. As a self-employed independent contractor, one of the best income tax relief strategies is to pay your state estimated tax before December 31st. If you pay by December 31, 2009 you get the deduction (on your federal return) in 2009. You can also charge these expenses on your credit card(s) in 2009 and receive the deduction in 2009, even though you won’t be paying for them until 2010. If you are having issues paying your estimated state taxes, a tax attorney can give you tax help to get the maximum income tax relief possible.

Year-End Income Tax Relief Tip #7: Make your stock market losses work to your advantage. If your personal portfolio has taken a nose dive, realize your tax losses before New Year’s Eve. Long term capital losses can be used to offset long term capital gains, and up to $3,000 of ordinary income, with any remainder carried forward for use in future years. This is about getting income tax relief not whether you made the right investment choices. If you still believe those stocks will go up again, buy them back on January 1st. Keep in mind that some mutual funds can have high capital gains distributions even as they lose money. The best income tax relief advice is to ditch these first because they are hitting you with a double whammy. As a self-employed independent contractor you have access to some of the best retirement accounts out there like a SEP-IRA. To understand which investing should be done as part of a retirement account, and which should be in your personal portfolio and when to take losses for maximum income tax relief, get tax help from an experience CPA or tax attorney.

Year-End Income Tax Relief Tip #8: Give your personal gifts before Rudolph goes flying. As a self-employed independent contractor, you can give a friend or family member up to $13K annually before the year end without having to pay gift taxes. (Your spouse can give that same amount to the same individual.) You can also give that same amount to your child’s or grandchild’s tax-free 529 education plan. If you haven’t funded such a plan yet, you can make a single contribution covering five years of gifting. That’s $65,000 you can give per donor per recipient tax-free. (Your spouse can match that contribution as well.)

Year-End Income Tax Relief Tip #9: Give gifts to clients: Gifts to clients are limited to $25 per recipient per year, BUT if the gift has your embossed logo on it and tells about your services, it isn’t a gift, it is an advertising or promotional expense. There is a fine line here, a quick call to a CPA or tax attorney for year-end tax help will help you stay on the right side of the law.

Year-End Income Tax Relief Tip #10: Take your retirement contribution to the max. Self-employed independent contractors have the best income tax relief vehicle the federal government has ever offered. While individual worker contributions to a simple IRA max out at $11,500, if you’re under 50 in 2010 ($14,000 if you’re over 50), how is this for serious income tax relief, as a self-employed independent contractor you can use SEP-IRAs to contribute 25% of your wages (or up to 20% of your Schedule C income) up to a maximum of $49,000. The income tax relief to a self-employed independent contractor are massive. A tax lawyer or CPA an give you the tax help to set up the right retirement vehicle for you.

I know that this is a long list but the income tax relief you can get from just paying attention to the calendar is huge. These 20 self-employed independent contractor tax help tips can make the difference between being a Grinch and having a Happy New Year. Your call.

For more information on achieving a tax resolution for your back taxes or IRS debt, visit www.taxresolution.com for a free tax relief consultation or call 866-IRS-PROBLEMS.

When starting a small business venture, it pays off to be objective. You will need to capture your projections in a written format. These objectives are best captured in what is known as a business plan. This functions as your road map and furthermore, it helps you gauge, in the course of the venture, if you are still in the right track.

Making a business plan may be simple or difficult, depending on the nature and scope of operation of the enterprise. As you write it down, you get to capture your short term, medium term and long term goals. These goals are what help you determine whether the enterprise is realizing its dreams or not as it progresses. You also get to gauge the risks at hand and determine how to deal with them effectively.

On a larger scale, the plan helps you do a SWOT analysis. SWOT is an acronym for strengths, weaknesses, opportunities and threats. This means that you can be able to identify where the venture is doing well, where it is failing or facing challenges, whether it has room for growth and improvement as well as whether it is likely to be at risk by operating in a given way. By so doing you will be able to determine the best course of action.

Writing a plan for your venture should be guided by a number of principles. The first one is that, it must adhere to a given outline, bearing in mind that there are many other enterprises out there coming up with such plans as well. You must also have the audience in mind. Is the plan for funding purposes or for partnership? The depth will be determined by the audience.

When you start a business, you sit down and write a business plan (at least, you should do this). After your business is up and running, you will have to take that next step which includes marketing. Before you decide the first move of your marketing campaign, before you spend a single cent of your marketing budget, you have to write a small business marketing plan as well. And, just as the business plan spelled out all of the needs and possibilities of the new business, your small business marketing plan should also spell out the goals that you would like to accomplish.

Whether you are talking about a small business that provides a local service or a larger business that has a broader customer base, the first and most obvious goal of the marketing plan should be to increase the number of customers and the number of sales that you have. These are similar but different goals: you can increase the number of people who are coming to your front door or visiting your web site without increasing your sales by a single penny. You do need to get more people to have a look at your business, but you need them to actually open their wallets and shop once they get there.

When you are making your marketing plan, you are setting a road map for the marketing campaign and hopefully answering a number of questions that come up along the way. You might have some concerns about the cost of the marketing or may wonder what the best type of marketing is for your business. You might also wonder about where you should do the bulk of your marketing. As you answer these questions your small business marketing plan will start to take shape.

After it is written and implemented, the next step in the small business marketing plan is to decide whether it is working or not. You set the goals and the time line for those goals to determine how well the plan is working. As an example, you could say that you want to increase your sales by a set amount in three months or increase interest in your business by a certain percentage, or a combination of both.

How to Save Money and Earn Money

Taking the time to review our current financial situation, figure out where we want to be 12 months from now and then mapping out the steps to get there on paper is a sure way to build a road map toward greater success.