Micro-business owners and the self-employed manage every aspect of their business themselves — including doing the business’ taxes. With all the tax forms, deduction qualifications, and exceptions to the rules, entrepreneurs need all the help they can get in filing taxes.
So here are some tax strategies for micro-business owners and the self-employed:
1. Consider a home-office deduction, which would allow the micro-business owner to deduct a portion of mortgage interest, real estate taxes, automobile expenses, and expenses from maintaining the home office.
2. Create a medical reimbursement plan, which would enable the business to reimburse the employee for all out-of-pocket medical expenses.
3. Employ your children, allowing for a business deduction. Dependents can also earn up to $4,700 without paying taxes.
4. Take a close look at what incorporating would mean for the business’s tax position — it doesn’t always help.
5. Research retirement plans designed specifically for the self-employed, including an IRA, SIMPLE, SEP, and Keogh plan.
Robert Hughes President National Association for the Self-Employed Grapevine, Tex.