Taking Control of Your Tax Destiny

Author: Keith Huggett

If you are self-employed, you control your destiny. You also have a great deal of control over how and when you earn taxable income, which gives you a lot of control over how much you pay in taxes. At the same time, you also have to take responsibility for paying your income and self-employment taxes, which can add up fairly quickly. Here are seven tax-planning tips that you should keep in mind:

1. Put some money aside for taxes: The IRS usually expects you to make quarterly payments, so make sure that you have enough for income taxes, self-employment taxes and sales tax payments.
2. Include family members in your tax planning: You may be able to reduce your tax burden by shifting income to family members who are in lower tax brackets.
3. Track your mileage: The miles that you drive for business purposes are generally tax deductible. With IRS mileage rates at or more than 50 cents per mile, they can add up quickly. You can also talk to an accountant to see if claiming actual auto expenses is a better deal for you.
4. Write off your health insurance: Your health insurance costs are fully tax deductible when you're self-employed, so ensure that you don't miss this opportunity.
5. Shift your income: If you've had an unusually good year, you can delay sending invoices until next year, or pay bills this year for next year to reduce your income. That way you'll shift profits into a year when you may not be subject to a high tax bracket.
6. Spend wisely: Many of the things that you do can be tax deductible. A tax-planning expert can help you determine what you can write off.
7. Plan for retirement: Planning for retirement doesn't only make good lifestyle sense, it is also an excellent tax-planning strategy. Self-employed people have access to additional tax-advantaged savings options like Keogh and SEP plans.