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Tax Planning/Indepentdent Contractor Tax ???

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Question
I am new to being an independent contractor and I am trying to figure out what I am able to deduct and what I can't. I will end up making 32k by as a 1099 worker and 4800 as a standard 1040 worker. My main concern is trying to get into the 33k and below tax bracket. Do you have any tips or a website that would list the deductions in a clear manner? Any help would be appreciated.

Thank you

Answer
Kyle - A few things to consider -

1. The deductions: You can look at Schedule C and find the list of categories that the IRS uses for sole proprietorships.  However, there are always businesses that have "other" types of expenses.  As long as they are ordinary, customary and reasonable, they should be deductible to your business.  See Schedule C here ->http://www.irs.gov/pub/irs-pdf/f1040sc.pdf

But, generally speaking, here is a list for you to review.  Since you don't tell me specifically what type of business you are in, I can't customize this list:

Accounting/bookkeeping, and financial consulting fees
Advertising expenses
Automobile expenses (only the percent that is used for business)
Bank service charges and fees
Books and periodicals
Business/trade conventions
Business gifts (annual limit of $25 per recipient)
Business meals (50% is deductible)
Coaching fees, if related to your business
Computer, printer, and software (if used over 50% for the business)
Consultant fees
Depreciation and amortization
Dues for professional and trade associations
Education expenses for maintaining or improving required skills
Email, Internet access, and web hosting services
Fax machine
Insurance expense
Legal and attorney fees
License fees and taxes
Merchant account or credit card processing fees
Office furniture and equipment
Office supplies
Online services used for the business
Parking and tolls
Postage and shipping
Printing and duplication
Self-employment taxes
Start-up expenses (amortized over 60 months)
State and local business taxes
Preparation of business tax return
Telephone expense (only for a separate business line)
Travel expenses

You can also use this tool to find typical expenses for your type of business: http://www.scorebuckscounty.org/typop.html

2. Realize that when you are self-employed, you are subject to at least two different types of taxes.  Your regular income tax on all your reported income and a self-employment tax, which is equal to (in normal years other than 2011 & 2012) a tax of 15.3% of your net income from your business after expenses.

3. One final thought.  You mention trying to get into the 33K tax bracket.  Realize that the US tax system is a "graduated" system.  You will pay a lower rate on the lower brackets and it will progressively be more on each amount above the preceding bracket.  It's hard to explain in an e-mail.

I hope this information is helpful to you.

Tax Planning

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OWEN S. ARNOFF, EA

Expertise

As an Enrolled Agent, I am fully capable of providing tax advice as it relates to personal and business income taxes. Enrolled Agents are the only Federally licensed tax practitioners and are admitted to practice before all administrative functions of the IRS. My specialty is working with small business owners who file Schedule "C" and helping them to structure their business in such a way as to maximize as many tax advantages as possible. I also enjoy working with individuals who have both routine as well as complex tax situations. I prefer to concentrate on individuals and small business tax planning.

Experience

I have a 25 year background in financial services including tax, bookkeeping, insurance, real estate and securities. I was previously the Chief Financial Officer of a local and national franchise organization. I am currently semi-retired, but used to own (in partnership with another EA) an individual and small business financial engineering firm where I work with nearly 2,500 individuals and small business owners in nearly every state and almost every continent, assisting them in all aspects of their tax and financial well-being. I have prepared or reviewed more than 8,000 tax returns in my career.

Organizations
National Association of Tax Professionals

Publications
http://www.amazon.com/Owen-Arnoff/e/B00BLRIZNU/ref=ntt_dp_epwbk_2

Education/Credentials
Enrolled Agent, Admitted to Practice Before the IRS, Accredited Tax Preparer, Fellow of National Tax Practice Institute, Certified QuickBooks ProAdvisor (1999-2011), Sleeter Group Certified QuickBooks Consultant, Life & Disability Insurance Agent License (California, Texas, Maine), Real Estate Agent License (California); Many years of continuing education in all these fields.

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