For many Americans, Tax Day has come and gone. But for the self-employed, including small business owners and freelancers, Tax Day will come again on June 15 – and in some ways, it can be even more confusing and complex.
Self-employed taxpayers should either prepay 100 percent of their 2012 tax liability or 90 percent of their 2013 tax liability to avoid penalties. The payment can be made all at once on April 15, but those who prefer to pay quarterly can make an Estimated Tax Payment by April 15, June 15 and September 15 of the current year and finally by January 15 of the next year.
“If you are self-employed, at the end of each quarter you are required to estimate your income for the year based on what you have received so far,” said Mark Steber, chief tax officer, Jackson Hewitt Tax Service Inc. “You must also estimate your deductions for the year based on what your expenses have been to date.”
Steber highlights some of the top deductions that self-employed taxpayers should be aware of and consider each quarter:
- Owning a Business with a Spouse – If you and your spouse operate a business together and file a joint return, both of you may be eligible to be treated as two sole proprietors instead of as a partnership. Each spouse would report their share of income and expenses on their own Schedule C, Profit or Loss from Business (Sole Proprietorship).
- Healthcare Costs – Up to 100 percent of medical insurance costs you pay for yourself, your spouse and your dependents may be deductible as an income adjustment. If you are self-employed and are covered by a high deductible health insurance plan, you may be able to establish a health savings account (HSA), in which you can save money exclusively for future medical expenses.
- Transportation – If you use your vehicle for business purposes, you may be able to deduct expenses associated with this use. The 2013 standard mileage for business use of a vehicle is 56.5 cents per mile.
- Home Office – You may be entitled to a tax break if you are operating a business from your home or if you maintain a separate structure for your business. You must be able to prove the office space is used regularly and exclusively for business and there is no other principal place for the business operation.
- Property Deductions – You may recover your investment in certain business-related properties through depreciation, which would allow you to deduct some of the cost of the property on each year’s return.
The tax preparers at Jackson Hewitt Tax Service can provide guidance on how to accurately determine the taxes owed throughout the year, along with relevant deductions to claim. Jackson Hewitt Tax Service also offers an online tax preparation product at www.JacksonHewittOnline.com. For more information, check out Jackson Hewitt’s “On the Street” video series, hosted by Chief Tax Officer Mark Steber and available on YouTube at http://www.youtube.com/jacksonhewitt.