Are You Self-employed? Look at These Abundant Tax Credits and Deductions!

Being self-employed can make tax preparation difficult. There is an abundance of tax credits and deductions available to you, but only if you qualify. So, be aware of the opportunities and pitfalls when filing a tax return as a self-employed individual.

•Use good bookkeeping software like Quicken to keep electronic track of your business operations.

•Keep good physical records. Use a fireproof box or safe-deposit box to hold all your receipts and documents instead of having to hunt for them at tax time. Remember that if you are audited, your electronic records won't do much good. The Internal Revenue Service wants to see hard copy receipts, bills, and statements to support your claims.

•Hang on to all your business related receipts. Save the receipts from anything and everything that might be conceived as a business cost. Coffee with colleagues certainly qualifies, as do lunches and dinners with business associates and clients.

•You probably have a home office deduction as long as you don't do business from any other physical location for which you pay rent or a mortgage. If your home office space is used almost entirely for conducting business, you most likely qualify for the home office deduction.

•Review Internal Revenue Service guidelines on occasion, to be certain that you comply with the regulations and restrictions that make you eligible for the deductions and credits you want. Sometimes restrictions and eligibility change, so you will want to check on these things for this reason as well.

•You should be able to deduct childcare costs since you are self-employed and need someone to tend to your kids when you are working. Self-employed parents often overlook this deduction.

•Set up a retirement savings account. Do this not only as a hedge against taxes, but to ensure your future as well. There are individual retirement accounts specifically for the self-employed. Retirement accounts are traditionally a good way to secure present earnings for years ahead, since they are usually not taxable until withdrawal. Talk to your financial consultant about starting an individual retirement account as soon as possible. You will be glad you did.

•If you have had a particularly successful year, you may want to think about deferring some income, specifically if you believe that next year may be slow for some reason. However, if next year looks bright, there is probably no sense to this option for you.

Self-employed people get some special privileges to claim tax deductions and exemptions. If your business is going great, this is a golden opportunity to save in taxes and provide for future. Chintamani Abhyankar suggests some useful tips.

Chintamani Abhyankar, is a well known expert in the field of finance and taxation for last 25 years. He has written many books explaining inside secrets of the magic world of personal finance. His famous eBook Stop donating your money to IRS which is now running in its second edition, provides intricate knowledge and valuable tips on personal finance and income tax.