As a self employed contractor, you're required to pay the full amount of Medicare and social security taxes instead of paying 50/50 between yourself and an employer. However, you can deduct half when filing federal taxes.
This is an area you have to be really careful in. If you use utilities such as internet and phone for your business, you may be able to deduct a portion of those expenses depending on hours of use.
The same things goes for your work space. If you have a home office and computer dedicated for business, you may be able to deduct the costs based on square feet.
However, this is a red flag to the IRS and may result in an audit. Just be sure to keep all of your receipts.
If you travel to meet with your clients or even just drive to the local office supplies store for new ink and paper, you may deduct the cost. You'll have to keep a logbook in your call at all times to record the mileage driven as well as the cost of gas at that time.
One thing to keep n mind is that if you deviate off a business driven path, you cannot include those miles in your estimate.
If you tend to use things such as printer paper and ink for your business, you may also deduct those taxes at the end of the year. Note that if you print more than your business documents, you'll need a separate supply of paper and ink for both instances. Keep receipts and records whenever possible.
Let's say you sell items on Ebay. Not only can you deduct the cost of shipping supplies, you can also deduct your listing and seller's fees. Any cost you have to run your business has the potential of being deducted. Have a domain name or web hosting? You may be able to deduct those costs as well.
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