Good News: Considering the economic climate, many people are working freelance to get ahead. Being a freelance worker actually qualifies you for tax advantages other professions don't have. As long as you're careful and use a little common sense, you can use the IRS code to your advantage and save a little green along the way.
Deductions: Being a freelance worker entitles you to make business deductions. The follow could qualify.
-Rent or lease for business property
-Legal and professional services
-Cost of Supplies
-Cost of Utilities
-Repairs and maintenance
-Qualifying classes and seminars
-Applicable business travels
Ordinary and Necessary Rule So you want to deduct something but it's not listed above? It could qualify. According to the IRS, to be deductible, a business expense must be both ordinary and necessary.
This means the expense is common and accepted in your trade, and the expense is necessary for you to run your business successfully. The IRS claims the expense does not have to be indispensable to be necessary. This gives you room to get a little creative. Just don't claim that new hot tub as a business expense! You know better than that.
Tax Reporting: Freelance workers use Form 1040 schedule C to list all their profits and losses.
Keep your reciepts: The IRS is keeping a close eye on deductions this year, so be cautious. If you're honest and keep your receipts for all purchases, you'll have ammunition if the IRS tries to cause problems.
Labels: Business Tax