Making Sense of Money Matters


the home office deduction for expenses such as utilities, rent and repairs.

  • Don’t overlook deducting personal expenses that you legitimately incurred for your business, such as the use of a cell phone or pager, business supplies, meals and travel expenses.
  • Whether you open an IRA (individual retirement account), SEP (simplified employee pension plan) or Keogh, you can earn significant tax advantages by putting away as much as $30,000. In addition, the contributions compound tax-free, and you can deposit funds even after your company’s fiscal year ends.
    Smith of Lifesaver Training Institute is well versed in dealing with independent contractors. His firm requires that he frequently hire instructors to train medical personnel and office workers in emergency life-saving procedures.

    “I have a three-page written agreement so these experts understand that they’re responsible for their own taxes, they must carry general liability insurance [in case of injury or damages] and must have workmen’s compensation insurance,” says Smith.

    An added benefit from Smith’s agreement is that by requiring the independent contractors to take out liability insurance, his company is indemnified if instructors give erroneous information. Because Smith’s instructors are independent contractors, he also requires that they provide their own equipment and submit monthly invoices, both of which save him money.

    “Unfortunately, most people don’t understand the rules and regulations of hiring independent contractors until they get fined,” states Michael Dodson, managing partner of Dodson & Rossi CPA, and an adjunct professor for the City University of New York in Manhattan. “Mostly, it occurs when an employee challenges an independent contractor status while filing for unemployment compensation.”

    Keep in mind that hiring independent contractors does not raise red flags, but the failure to send 1099 forms to independent contractors can. If the independent contractor earns over $600 and claims the income on his or her taxes and you fail to report it to the government, then you could be penalized by the IRS.

    To determine whether an individual you hire is an employee or an independent contractor, check out the IRS’ Classification
    for Independent Contractor by visiting the IRS’ Website at and view publication 15A, Employee Supplemental Tax Guide; 2, Employee or Independent Contractor.

    Just as independent contractors do, you must assess your company’s liability. To accomplish this, it’s critical to find an insurance agent that understands your type of business, says Jeanne Salvatore, vice president of consumer affairs of
    the Insurance Information Institute in New York City.

    Matthew Tassey, past president of the Association of Health Insurance Advisors in Washington, D.C., agrees. “The role of an agent or broker is not only to help with plan costs and benefits, but to answer questions.” He suggests contacting trade
    associations, your local chamber of co
    mmerce and other businesses for referrals.

    After joining the National Association for the Self Employed, Bell was able to obtain insurance benefits through the organization at discounted rates.

    Salvatore recommends insuring your business with a business owner’s policy (BOP)-an insurance package for small businesses that provides coverage for business liability, loss of income and business interruption. However,

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