April showers have always promised May flowers, but another
grim reality of the month is the ever popular topic of taxes. My question, as
we talk about this month about appearances is a simple one: what do your
finances look like? Are you taking advantage of the tax breaks your work
offers? No one at the IRS is interested in giving you money back if you don’t
ask for it. That means it’s incumbent upon you to learn what you can. First
realize you need to talk with a professional. Find a good book at the library.
Do a little research.
You are an independent contractor. According to Wikipedia,
that means you provide services to another entity under terms of a contract or
within a verbal agreement. You operate with a lot more latitude than employed
counterparts. You often enjoy flexibility of arranging your own hours. Your
only uniform is your own good sense in putting your best foot forward. Most
importantly, you receive a 1099 instead of a regular W2 form at the end of the
year. That’s a huge benefit!
The bottom line is simple: your mileage, clothing dedicated
to your work, work-related expenses all add up. Portions of your cell phone and
internet are also deductible. If you have a dedicated home office, that is
deductible. The potential is enormous in calculating your tax liability. As
independent contractor, you enhance your image when you understand the nuances
of your position and can speak knowledgably about your work. That includes
learning about just a few of the intricacies of the tax code.
Why are we talking about this now? First of all, this is
when you should be setting up a small notebook for cataloging expenses and
collecting pertinent receipts. Having a system means you just might follow
through in keeping track of your income, but not having a system means you
definitely won’t. It doesn’t have to be a cumbersome process. As a matter of
fact, keeping it simple ensures its success. Secondly, keeping track of your
expenses is part of your image. Wouldn’t you rather be seen and known as
someone who has it all together rather than a person floating through life,
always at a disadvantage? And it’s not just about appearances, is it? It’s
about your own bottom line. The amount of money in your pocket offers a direct
correlation to how much you enjoy/appreciate being an independent contractor.
You’ll find a basic perspective on your tax classification
in this Kiplinger article. Quick Books offers a list of potential deductions for independent contractors.
The article is thorough and an excellent starting place if you are new to the
idea of deducting your business expenses. Smart is the new sexy, so bone up on
this topic now. Learn how to keep more of your hard-earned cash.
