Tax Resources

Estimating Quarterly Tax Payments

Q: I’m a brand new freelancer. How can I estimate my 2012 earnings so I pay enough in quarterly estimated tax payments , when I can’t anticipate how much I’ll earn this year? A: Once you become self employed (no longer receiving wages and a W-2) you enter the world of business taxes!  You are correct in recognizing that you have left the world of income tax withholding good-bye.  Quarterly estimated tax payments are the alternative for those with no employer to withhold throughout the year.  These require you to estimate your total bill, divide it by four, and send quarterly estimated tax payments to the IRS.  As with withholding, you owe specific percentages by specific … Read more →

Tax Deductions For Home Office

Q: Does the home office deduction work if you rent your home?

A: Yes it does!  The home office deduction is probably the most misunderstood deduction in the entire tax code. For years, taxpayers feared that claiming tax deductions for home office would raise an automatic audit flag. But Congress has relaxed the rules, so now it’s far less likely to attract attention.

Qualifying for tax deductions for home office is fairly simple, here’s how:

You must use your office regularly and exclusively for business to qualify for the deduction.  Once you’ve qualified, you can start deducting expenses. If you’re taxed as a proprietor, you’ll use Form 8829. If you’re taxed as a partnership or … Read more →

S Corp Taxes

Q: If I change to an S corp half way through the year do I still benefit or is it best to convert to an S corp at the beginning of the year?

 

A: “I can’t tell from your question if you’re thinking about electing S corp taxes for your existing business entity or possibly for a new entity, so I’ll address both. Actually, when you convert to an S Corporation the election is made effective for the entire tax year. To benefit from S corp taxes, you must elect in a timely manner.  The S Corporation election is actually due by the 15th day of the third month of your tax year. So if your … Read more →

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