914 Tax

Pay My Invoice Now 914-712-6919
  • Home
  • About
  • Tax Solutions
    • Asset Seizures
    • Audit Representation
    • Delinquent Returns
    • Federal Tax Liens
    • Innocent/Injured Spouse Relief
    • Installment Agreements
    • Levies and Garnishments
    • Offer in Compromise
    • Payroll Tax Problems
  • Tax Preparation
  • Testimonials
  • Tax Tips
  • Contact Us
  • Home
  • /
  • self employment

Tax Relief Options for Small Business Owners

February 14, 2022

If you are running a small business, you have an unwanted partner who will dig into your pocket every year, it’s the IRS. The IRS wants to know what you are doing, how much you are earning and most importantly how much you are paying in taxes. The tax agency is becoming increasingly aggressive in this regard. While the audit rate for individual returns has been hovering at far less than 1%, the audit rate for small businesses can be as much as 10 times higher.

It does not matter if you operate as a sole proprietor and use Schedule C to claim your income or if you are set up as a corporation (C or S), partnership or LLC/LLP – the IRS is watching what you do, and if they think you are not paying your fair share they will certainly come calling. When that demand letter from the IRS arrives, knowing what to do next can make all the difference, and the more you educate yourself the easier it will be to deal with, and eliminate, the tax debt.

Note: As a tax resolution firm, we always recommend that you reach out to a professional who knows how to aggressively negotiate and defend you against the IRS on your behalf. If you owe back taxes or are under audit, our firm can help negotiate with the IRS and potentially settle your tax debt. Call us today. Our tax resolution specialists can navigate the IRS maze so that you have nothing to worry about. Get help from Ron Friedman, CPA.

Small business owners are increasingly the target of enforcement efforts by the IRS, but the IRS does have some programs in place to make paying what those business owners owe easier. In some cases, those small business tax relief and tax resolution programs let you settle for less than what you owe but qualifying is not as straightforward as you might think.

For businesses that may be eligible, the assistance of a tax resolution specialist is absolutely critical. These experts can help guide you through the process and make sure you qualify, so you can rest a little easier and get back to building your business.

Payment Plans/Installment Agreements

If the amount your small business owes to the IRS is relatively small and you do not want to deal with additional hassles, it may make sense to pay the entire bill in full. If paying in full would be a hardship, the IRS does offer payment plans, and setting one up can make paying back what you owe easier and more financially palatable.

Keep in mind that interest will continue to accrue while the debt remains outstanding, and that is something to think about.

Offer In Compromise

If you’re under a lot of financial hardship, it may make more sense to try for

an offer in compromise (OIC), a special IRS program that could allow you to pay back less than you owe.

The offer in compromise program is a popular one with individual taxpayers and small business owners. If paying the entire amount would create a financial hardship for you, your family or your business, a tax resolution specialist can help you make the case to the IRS that you deserve a break.

What’s the best option?

Each of these options has its pros and cons, and it is important to understand how these programs work and who qualifies to use them. If your small business is in trouble with the IRS, taking the right action right away could reduce the amount you owe, give you some breathing room and allow you to focus on your clients – not on your taxes.

Running a small business has its challenges, but those difficulties are nothing compared to the stress and anxiety small business owners feel when dealing with the IRS. With so many small business owners now in IRS crosshairs, it has never been more important for freelancers, gig workers and the self-employed to have an advocate in their corner.

If you find yourself on the wrong end of an audit, a tax bill or an enforcement action from the IRS, the steps you take next are absolutely critical. Trying to take on the IRS on your own is a dangerous, and potentially expensive, thing to do, and you should always contact a tax resolution firm.

By working with an expert, you can gain access to vital information about small business settlement programs the IRS offers. You can gain access to the expertise you will need to settle your tax bill for less than you owe and get back in the good graces of the IRS. Time is of the essence when the IRS comes calling, and with the interest and penalty clock ticking you do not have one second to waste. So call us, your tax resolution expert, for a case evaluation. Get help from Ron Friedman, CPA

Facebooktwitterredditpinterestlinkedinmail
February 14, 2022Categories: back taxes, business owners, business taxes, filing taxes, income taxes, Installment Agreements, self employment, Tax Resolution Strategies, taxesTags: audit, Fresh Start, tax help, tax resolution

Tax Deductions You May Be Eligible for as a Freelancer

December 24, 2021

Tax season can be a stressful time, especially for freelancers who might owe taxes at the end of the year. It can be overwhelming to look at the tax debt you owe from the profits you have made.

Our firm specializes in tax resolution and helping people who owe the IRS or state $10,000 or more. We’ve seen small business owners and freelancers get blindsided every year by a huge tax bill and often falling behind on their taxes for years on end. If that’s you, we can help. Contact our firm today to discuss your tax debt settlement options. Get help from Ron Friedman, CPA.

So, if you’re worried about how you’re going to pay your tax bill this year, try to relax. There are a wide variety of legitimate deductions you can utilize as a freelancer to bring your tax liability down. We encourage you to talk to a tax professional to see if any of the following deductions apply to you.

1. Home Office

If you have a home office, you will be able to deduct a part of your rent or home expenses as an expense for your business. Be careful though, home office deductions may require a dedicated office space so speak to a tax consultant to find out if you qualify. In addition to your home office, you can deduct any related office supplies you used over the year. Keep the receipts for paper, ink, and any other home office supplies you’ve purchased. You should also be able to deduct any technology you bought specifically for work. If you have a work computer, internet, and office furniture, those can maybe qualify you for a tax deduction. Furthermore, you can deduct any expensive software programs you need to purchase for work like Adobe photoshop or your word processor.

2. Insurance Premiums

If you work from home, you may be able to deduct your health insurance costs or any other insurance that is required for your job. If you have to purchase liability or malpractice insurance, that is a work-related deduction.

3. Travel Costs

If your work requires you to travel, the cost of that travel is a deduction. Hotel costs, mileage, and even food you eat during work trips are deductible expenses. However, if you are partially traveling for work and luxury at the same time you have to be careful. Any portion of your trip used for a personal vacation is not a deduction. You can only deduct expenses that are specific to your work costs.

4. Advertisement Expenses

If you’ve spent any money advertising your business, you can use that expense as a write-off. Any type of advertisement will qualify as a deduction whether you created online ads or utilized influencer marketing for sponsored posts. If you spent money on promoting your business, record that expense for your tax records.

5. Car Expenses

If your automobile is an integral part of your work, you can deduct expenses that are associated with it. You can itemize costs like auto insurance, gas, and any maintenance work you had to pay for. However, you can only deduct the expenses you utilized while working. If you used your business car as a personal car, you cannot deduct all of these expenses and will need to figure out the percentage of time you used your car to work.

6. Occupational Licenses

If your freelancing job requires you to pursue a license in your field then that license becomes a business expense. You may not have to renew your license annually but in the year you pay to renew, you can deduct that from your tax costs.

Owe Back Taxes and Need Tax Relief?

While many of these tax breaks may seem incredibly appealing, filing them incorrectly can result in an audit or the IRS disallowing your deductions and charging  you penalties and interest on your tax debt, making your problems worse.

If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem. Get help from Ron Friedman, CPA.

Facebooktwitterredditpinterestlinkedinmail
December 4, 2021Categories: attorneys, filing taxes, income, income taxes, IRS, Self Employed, self employment, tax mistakes, tax notices, tax planning, taxes, W-2Tags: 1099-MISC, back taxes, freelance, irs debt, reduce taxes, self employment, tax deduction, tax help, tax resolution

Four Ways Freelancers and Gig Workers Can Trim Their Tax Bills

December 10, 2021

It is hard to beat the freedom and flexibility of freelancing and gig work. When you work for yourself, you can set your own hours, turn your home into an office and even ditch the daily commute.

All that is great, but there is one thing about freelancing that is much less pleasant. Compared to their corporate counterparts, self-employed individuals face an additional tax burden, an expense that takes many of them by surprise.

Note: If you end up falling behind on your taxes and the IRS or state claim you owe $10,000 or more, reach out to our tax resolution firm and we’ll schedule a free, no-obligation confidential consultation. Get help from Ron Friedman, CPA.

If you love the freedom of gig work but not the big tax bill, you need to think ahead. A little proactive planning can go a long way, so you can keep more of your hard-earned money in your pocket. Here are four smart strategies you can use to trim your tax liability and get more out of your freelancing and gig work.

#1. Fund a Health Savings Account

If you work for someone else, there is a good chance your boss picks up part of your health insurance costs, but freelancers and gig workers do not have that luxury. These self-employed individuals face additional challenges when it comes to health care, seeking affordable policies on the open market and saving money where they can.

One way the self-employed can save money and trim their tax bills is with a health savings account. Eligible individuals can contribute to a health savings account on a pre-tax basis, taking a serious tax deduction while making their health care more affordable. This tax savings can be a very big deal.

#2. Contribute to a Retirement Fund for the Self-Employed

Freelancers and gig workers need to look out for their own retirement, but there are plenty of options available. The annual contribution limits on retirement plans for the self-employed are among the most generous around, so you may be able to shelter a significant portion of your earnings from the tax man.

If you have a tax ID for your freelance business, you may be able to contribute to a solo 401(k). This plan works much the same as a traditional 401(k) plan, but the contribution limits could be even higher. Even if you do not have a tax ID, you can shelter part of your freelance or gig work income with a SEP-IRA or similar retirement plan.

#3. Take the Home Office Deduction

If you work out of your home, taking the home office deduction could save you a lot of money. If you are eligible for this valuable deduction, you could write off a portion of your property taxes and other home ownership costs, reducing your tax bill and keeping more money in your pocket.

There are specific rules regarding the home office deduction, so check with your tax preparer to make sure you qualify. If you can take the deduction, be sure to keep accurate records, and take photos of the office in your home.

#4. Push Income Into the Next Year

Freelance income can be notoriously unpredictable. One month is great, while the next is terrible. Yearly earnings can be just as variable, making tax planning difficult.

If you are having a particularly good year, you may be able to reduce your current tax bill by pushing some of that income into the following 12 months. When the end of the year approaches, delaying client invoices and moving income into the next year could save you money in the long run.

Once again, it is important to consult a tax professional before implementing this strategy. The IRS has established strict rules concerning income reporting, and you do not want to run afoul of the tax agency.

As a self-employed individual, you face some serious tax challenges, including the dreaded self-employment tax. That higher tax burden makes smart planning essential, and you can start that planning with the four tips listed above.

Owe Back Taxes and Need Tax Relief?

If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem Get help from Ron Friedman, CPA.

Facebooktwitterredditpinterestlinkedinmail
December 4, 2021Categories: back taxes, filing taxes, income, income taxes, IRS, retirement, retirement planning, Self Employed, self employment, tax mistakes, tax planning, tax records, Tax Resolution Strategies, taxesTags: 1099-MISC, freelance, reduce taxes, retirement, self employment, tax deduction, tax help

8 Ways to Get Ready for Tax Season and Avoid a Back Tax Problem

November 30, 2021

The holidays are here. Not to be a Grinch but, right around the corner is a less fondly anticipated time of year. Before you know it, you will be taking down the Christmas tree, pulling down the holiday lights and getting ready for the tax season to come.

Tax season is decidedly less fun than holiday season, but the two times of year do have one thing in common. Just like the holidays, tax season requires lots of preparation and planning, and if you want to be ready, you need to start early.

Why am I writing this article? It’s not to spoil your holiday cheer, it’s because we’ve seen what it’s like when you’re not prepared. We help people who fall behind on their taxes and owe the IRS tens of thousands of dollars in back taxes, and it’s often because they simply failed to prepare and they procrastinate on their taxes.

If you do get in trouble with the IRS and they claim you owe $10,000 or more, reach out to our tax resolution firm and we’ll schedule a free, no-obligation confidential consultation to explain your options in full to permanently resolve your tax problem Get help from Ron Friedman, CPA,

So if you don’t want to end up owing the IRS a ton of money, Here are 10 ways to get ready for tax season and reduce your stress level as this annual ritual approaches.

#1 Organize your records.

Now is the time to drag out last year’s tax return, pull out your most recent pay stub and get organized before the season starts.

#2 Settle any back taxes you might owe.

If you have years of unfiled returns or have a tax issue for anything besides the current year, you should get this handled now, before the upcoming tax season. When April 15th comes around, your tax professional is likely swamped with returns and they’ll pay less attention to your back tax debt. We recommend reaching out to a specialized tax relief firm like ours who handles complicated tax debt cases all year round.

#3 Defer bonuses and incentive pay.

If you’re going to owe taxes, it might make sense to defer getting paid so you can lower your taxable income. If you can, you might want to defer any bonuses and incentive payments. You can also defer payments from retirement accounts and IRAs to save on current-year taxes.

#4 Look for additional deductions.

Now is the time to make those last-minute donations to charity, so start writing those checks and gathering up those household goods. Be sure to get a receipt and save your cancelled checks so you can substantiate your charitable giving if a question should arise later.

#5 Expand your education.

Not only can taking a class improve your business or career prospects and help you get ahead, but that additional education could also lower your tax bill. You might qualify for a generous tax credit or take a good tax deduction for investing in your future.

#6 Up your retirement savings.

The end of the year is the perfect time to increase your 401(k) contributions and make your annual IRA investment. Maxing out your 401(k) and IRA contributions is one of the best ways to reduce your tax bill while saving for the future.

#7 Sell your losers and let your winners run.

if you have substantial capital gains in your stock portfolio or crypto portfolio, selling your losers could lower your tax bill. You can use those losses to offset your capital gains and save money on your taxes.

#8 Estimate your income for tax planning.

You will not know the exact amount of income you received until all your documents are in, but you can estimate your compensation and start doing some advance tax planning. This can be key in preventing back tax debt since you wont be blindsided by a large tax bill come April 15th.

Tax season will be here before you know it, and now is the time to get ready. You do not have to wait until April to start your tax planning, and the sooner you get started, the sooner you can put this unpleasant task behind you.

Need Tax Relief?

If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem Get help from Ron Friedman, CPA.

Facebooktwitterredditpinterestlinkedinmail
December 1, 2021Categories: Accountants, audit, back taxes, filing taxes, IRS, self employment, tax mistakes, tax notices, tax planning, tax records, taxes, W-2

Recordkeeping Tips for Freelancers and Gig Workers So You Can Avoid Getting in Tax Trouble

June 27, 2021

Tax Prep

If you are working as a freelancer or gig worker, you are certainly not alone. Millions of men and women are earning extra income driving for ride sharing services, designing websites for online entrepreneurs and writing for local businesses.

Some freelancers and gig workers have even said goodbye to their traditional careers, trading the security of a steady paycheck for the freedom and flexibility of gig work and freelance clients. But whether you are freelancing full time or just for extra cash, you need to keep careful records so come tax time, you can stay out of tax trouble.

Note: If you fall behind on filing your taxes, you’re not alone and we can help. Reach out to our tax resolution firm and we’ll help you file late tax returns and negotiate with the IRS if you owe back taxes. Get help from Ron Friedman, CPA.

Set Up a Separate Bank Account

Freelancers and gig workers play many roles but they all have one thing in common, they are also business owners.

Whether or not you have incorporated your business or formed a formal business, you do operate your own business. That means you need a separate bank account to collect your earnings and pay your expenses.

If you have not already done so, you should set up a separate bank account for your freelancing income. If you do have a formal business structure and an employer identification number (EIN), you can use that information to open the account. If not, you can simply open a second account to collect your payments and take care of any business-related expenses.

Print Reports from Payment Providers

Gig workers and freelancers are paid in many different ways, from direct payments from clients to automated clearinghouse (ACH) transfers to their bank accounts. These independent workers may also receive payment through third party apps like Paypal, Stripe and Payoneer, and keeping it all straight can be a real challenge.

Luckily many of the major payment providers make it easy to find out exactly how much their members received during a given time period. If you want to see where you stand, and how much tax you might owe, sign on and print out a payment report from every provider you receive income from.

You can fill out those reports with your own carefully kept records, including documentation of direct client payments and bank transfers. If you are unsure how much you have received via ACH, you can check with your bank or request a written report.

Signing up for a bookkeeping service or bookkeeping software can also help keep track of all your income and expenses.

Maintain Contact Information for Everyone You Have Worked For

During the course of a single year, freelancers and gig workers may work for dozens of individuals and companies, and they may receive payments from just as many sources. In a perfect world, everyone who hires those freelancers and gig workers would maintain their own records and send out 1099s for tax purposes, but that is far from guaranteed.

If you want to avoid unpleasant entanglements with the IRS, you need to keep your own records and check off each 1099 as it comes in. If you earned income from a client and do not receive a 1099, it is your responsibility to follow up and get the proper paperwork, so make your life easier and keep contact information from everyone you worked for, even if they were only a one-time client.

Keep a Running Tally with a Spreadsheet

It can be hard to track your income from freelance jobs and gig work, but a spreadsheet will make it easier. If you want to avoid underreporting your income and the tax penalties that could bring, set up a spreadsheet and record every dollar you earn from your freelancing and gig work efforts.

Keeping a running tally of your freelance and gig work income serves a number of different purposes. For one thing, it will help you determine the amount of your required quarterly income tax payments, so you do not overpay or underpay what you owe. Tallying your income as you go can also help you see how you are doing, making it easier to ramp up your freelancing and gig work efforts as you go.

Measure, Photograph and Document Your Home Office

As a freelancer or gig worker, you may be eligible for some generous income tax deductions, including a write-off for your home office. If you operate your freelancing business out of your home or find gig clients there, you may be able to deduct part of your utility bills, rent or mortgage and other applicable expenses.

Not just any space will do if you want to take the home office deduction, and proper documentation could be the difference between a valid deduction and a disallowed one. You must use your home office solely for your business, and it is important to keep careful records to avoid problems with the IRS.

That means measuring the space your home office occupies, so you can compare it to the total square footage of your home. It also means photographing the space, so you can show those images to the IRS if they question the deduction.

Scan Receipts to Make Tax Deductions Easier

You may also be eligible for additional tax deductions, including write-offs for office supplies, internet access and the like. But you will need to back up those deductions if the IRS comes calling, so make sure you have all those receipts on hand.

A shoebox full of paper receipts will not do, so make sure you scan or photograph those documents and keep them in a safe place. That could mean setting up a folder on your hard drive (with a backup plan in place), uploading the images to the cloud or a combination approach designed to safeguard records of your business-related purchases.

Life as a freelancer or gig worker can be wonderful, but keeping proper records is essential. From making tax planning easier and less stressful to saving you money, there are many advantages to keeping careful records.

If you do run into tax trouble, reach out to our tax resolution firm and we’ll schedule a free, no-obligation confidential consultation to explain your options in full to permanently resolve your tax problem. Get help from Ron Friedman, CPA.

Facebooktwitterredditpinterestlinkedinmail
June 27, 2021Categories: filing taxes, Self Employed, self employment, taxes

Made a Mistake On Your Tax Return? Here’s What To Do.

May 1, 2021

Tax returns can be complicated and tricky to understand. Even for a professional, it can be surprisingly difficult to get every number and detail right.

Often, you only notice the mistakes when you take a casual look at your return days after you submit it online or drop it in the mailbox. Or worse, the IRS sends you a letter telling you something is off.

So, is there anything that you can do after your return is in?

Actually, there’s a lot that you can do. But if you don’t know where to start, it’s best to leave it to a professional. Our tax resolution specialists can navigate the IRS maze so that you have nothing to worry about. Get help from Ron Friedman, CPA. We help people who owe back taxes or have back tax debt. Call us today for a free case evaluation.

3 Major Types Of Mistakes

There are many red flags the IRS looks for on each tax return, but here are three common mistakes taxpayers make.

1: Not reporting all your income. No matter how much or little you make, report everything. In some way or another, unless you run a strictly cash business (another red flag), all of your income is reported to the IRS. W2, 1099 and other forms you receive are duplicated and sent in to the IRS. If your reported income doesn’t match theirs, that’s a red flag.

2:  Overstating business expenses. Depending on the type of job you have, there can be many legitimate expenses that your employer doesn’t reimburse you for. If you’re a business, you might be tempted to write off just a little extra. These might be genuine deductions. But don’t try to deduct something that’s not on the approved list and don’t claim deductions way outside the norm. Check with your tax professional and stay up to date with tax laws so you’re not padding your tax return with write offs.

  1. Math errors. Whether you file electronically or still file paper forms, your information gets entered into a computer. And one thing computers are very good at is doing math. If things don’t add up, or there was an honest mistake in inputting the information, it can raise a red flag. A math error won’t necessarily get you an audit, but it will get attention you may not want. Make sure to double check your returns and have a qualified tax professional assist you and keep you out of tax trouble.

Filing an Amended Return – The 1040X

Individual income tax returns filed with the IRS can be amended up to three years after the due date of the original return by filing IRS Form 1040X.

On a 1040X form, the IRS only asks to be shown what was originally filed, what the corrected details are and the reason why you need to make changes. The form also includes a section where you get to change the personal exemptions that you’ve claimed on your tax return — just in case you make a mistake listing your dependents.

A few tips on filing your 1040X form

  • For each year that you need to make corrections for, you need to use a separate 1040X form and mail it in, in its own envelope.
  • Each form should have the return year mentioned at the top.
  • On the back of the form, you need to explain the changes you’ve made and your reasons for them.
  • Any schedules, forms or anything else that are affected by your change need to be sent in with the form.
  • If the corrections made to your federal form affect your state taxes, you need to send in a corrected return for that as well.

However, we strongly suggest consulting a tax resolution professional to help with your amended return. They can often file multiple years of unfiled tax returns, help you settle for a fraction of what you owe, and at the very least save you a headache.

You Have 3 Years

Many tax filers only notice a mistake on a tax return only when they look at it preparing their taxes the following year. Mistakes may come to their attention in one of several ways. They may share something with their tax preparer that they may have neglected to mention in a previous year. The tax preparer, then, may notice the need for amendments to a previous year’s return, as well.

There is no set time period within which you must correct your return. You can do it any time you notice it. A general rule that the IRS follows, though, is to entertain corrections for 3 years after an original return is filed.

If Correcting Your Mistake Results In More Taxes Owed, You Should Still Amend Your Return

If your tax return contains a mistake that shortchanges the IRS in a more serious way, chances are good that the IRS will discover it. For instance, if you made money off a freelancing job that you didn’t file a 1099 form for, the IRS could find out and you could end up paying interest for a few years for the tax owed. If you catch it yourself, you’ll save on interest, at least.

If you know you’ll have outstanding tax debt and owe more than $10k to the IRS or state but can’t pay in full, contact our firm today. We help people find tax relief and sometimes settle their tax debt for a fraction of what’s owed Get help from Ron Friedman, CPA.

Facebooktwitterredditpinterestlinkedinmail
May 1, 2021Categories: filing taxes, Self Employed, self employment, taxes

Self-Employed and Gig Workers: Should You Claim the Home Office Deduction?

March 23, 2021

The rise of freelancing, self-employed and gig work is one of the biggest labor stories of the last 20 years. More and more workers have been looking beyond the normal nine to five and making their own way in the world, creating an income they can rely on, one that is directly tied to their skills and abilities. COVID-19 only accelerated this trend.

Working as a freelancer or gig worker can also open up a world of tax savings possibilities. From retirement plans with generous contribution limits to health savings accounts to cover the high cost of private insurance to the ability to write off office supplies and other essentials, this class of workers enjoys some truly phenomenal tax breaks.

Generous Deduction or Audit Trap?

One of the most generous of those tax breaks is also one of the most misunderstood. The home office deduction has been around for decades, but many freelancers and members of the gig economy are still afraid to take it.

The idea that simply taking the home office deduction will trigger an audit is outdated but rooted in historical fact. In past decades, the home office deduction was widely regarded as a tax dodge, and the IRS often took a dim view of it.

Times have changed, however, and these days the home office deduction is no more likely to trigger an audit than any other business deduction. And while small business owners, including freelancers who claim their income on Schedule C, are still more likely to be audited, the overall audit rate is hovering at all-time lows. So, should you take the home office deduction, and how can you tell if you are eligible? Here are some basic guidelines to go by.

Note: If you do find yourself under audit and owe the IRS money for back taxes, don’t try to fix it on your own! Reach out to our tax resolution firm and we’ll help you negotiate with the IRS and get tax relief. Get help from Ron Friedman, CPA..

Exclusive Use

One of the most important things to keep in mind is that your home office must be used exclusively for your business. Many freelancers and small business owners block off a section of their home and use it exclusively for their business, and that typically qualifies them for the home office deduction.

You do not have to give up large portions of your home to claim the home office deduction. Even a part of one room could qualify as long as it is distinct and separate from the rest of the area. You could, for instance, partition off a section of a spare bedroom and claim it as a home office.

Regular Use

In order to qualify as a home office, the space you claim must be used regularly as part of your business. If you block off a room or set of rooms, you cannot go back and forth between business and personal use.

If you plan to claim the home office deduction, it is a good idea to keep records of how the space is used. Keeping a log of the hours you spend there and the business activities you perform can help you back up the deduction if the IRS comes calling.

Primary Place of Business

The last part of the qualification process is the nature of the business and how the home office supports it. In order to qualify for the home office deduction, the space you designate must serve as your primary place of business.

That means your home office is where you meet with clients, where you perform your work and where you complete your business-related paperwork. If you rent space outside your home or regularly meet with clients somewhere else, you may not be able to justify the home office deduction in the event of an audit.

The nature of your business matters as well. If you work as a freelance writer or website designer, the IRS will probably not question your home office deduction. But if your primary source of freelance income is driving for Uber or Lyft, the tax agency may question the legitimacy of your home office.

Solid Recordkeeping is Essential

You should not be afraid to take the home office deduction if you are eligible for it, but you should be ready to back up your claim if the IRS comes calling. Solid recordkeeping is a must for freelancers and gig workers claiming a home office deduction, and those records should be highly detailed and readily available.

Keeping a daily log of your freelance and gig work activities is a good start. You can keep this log manually or electronically, but it should be up to date and complete. If you are diligent with your recordkeeping and eligible for the home office deduction, even a full-fledged audit could be no big deal.

The home office deduction is widely misunderstood and underutilized, especially in the age of gig work and widespread freelancing. If you are eligible for this generous deduction, you should definitely take it. Working for yourself is hard work, and every tax break you can get will make your efforts more valuable.

OWE BACK TAXES?

If you’re going to owe money to the IRS after filing your return, It’s important to note that only experienced firms like ours are able to handle tax debt cases since negotiating with the IRS requires specialized skills that often fall outside of the scope of most conventional accounting, tax, and tax law firms.

Our firm specializes in tax problem resolution. We have CPAs, EAs and attorneys who can represent you before the IRS. We serve clients virtually so don’t hesitate to reach out.  If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem. Get help from Ron Friedman, CPA.

Facebooktwitterredditpinterestlinkedinmail
March 7, 2021Categories: filing taxes, self employment, taxes

Self-Employment Taxes and The Common Traps To Avoid So You Don’t Owe Back Taxes

March 7, 2021

People often dream of quitting their jobs and going into business for themselves so that they can pursue a passion and work without a boss. Self-employment can be a rewarding career decision, but it can lead to higher taxes and tax returns that are more complex that what you initially bargained for.

If you’re self-employed, it is important to understand how taxes work so you can avoid making a mistake and owing more than your fair share of taxes.

Note: If you owe back taxes and need tax relief, our firm can help! We specialize in resolving complicated self-employed and small business back tax problems. Contact our firm today!  Get help from Ron Friedman, CPA.

Definition of Self-Employment

The IRS considers you to be self-employed if you work as a contractor, freelancer, small business owner or are otherwise in business for yourself. If you earn income directly from clients and you don’t have an employer that withholds money from your pay for tax purposes, you are self-employed.

Tax Withholding and Estimated Taxes

If you work as an employee, your employer automatically takes a certain amount of money out of your pay each month to cover your tax obligations, which is called tax withholding.

Self-employed workers do not have an employer to withhold income for tax purposes, so they are responsible for paying their own taxes to the IRS through estimated tax payments. Estimated tax payments must be sent to the IRS on a quarterly basis if you expect to owe at least $1,000 in income tax at the end of the year.

The due dates for estimated tax payments are April 15, June 15, September 15 and January 15. Failure to plan properly and pay enough estimated taxes during the year can result in a tax penalty and a large surprise tax bill. If you pay at least 90 percent of the tax you owe or 100 percent of the total tax you owed from the previous year, the IRS typically will not assess a tax penalty.

Self-Employment Taxes

Self-employed workers must pay the self-employment tax (SE tax) which goes toward Social Security and Medicare in addition to normal income tax. Employees split the cost of paying into Social Security and Medicare with their employers, but self-employed workers must pay the full amount themselves.

We always recommend hiring a professional to handle your taxes and stay compliant, but we especially recommend hiring a qualified tax relief firm if you find yourself behind on any taxes or you’re hit with a large tax bill you can’t afford to pay.

Do I Have To Report Side-Income If I Have A Normal Job As Well?

Individuals with self-employment income must file an income tax return if they have net income from self-employment of $400 or more. In addition, you must report any self-employment income you make during the year on your taxes even if you hold down a normal job.

For example, if you work as an employee year-round but you take on small contract jobs on the side to make extra cash, that money must be reported as self-employment income when you file your tax return even if you don’t make enough extra cash to warrant paying estimated taxes.

It’s a common misconception that you don’t have to file or report income if it’s “cash” or if it’s from a side hustle. Not reporting it could lead to more trouble than it’s worth and the IRS will add penalties and interest on top of the taxes owed.

OWE BACK TAXES?

 If you’re going to owe money to the IRS after filing your return, It’s important to note that only experienced firms like ours are able to handle tax debt cases since negotiating with the IRS requires specialized skills that often fall outside of the scope of most conventional accounting, tax, and tax law firms.

 Our firm specializes in tax problem resolution. We have CPAs, EAs and attorneys who can represent you before the IRS. We serve clients virtually so don’t hesitate to reach out.  If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem. Get help from Ron Friedman, CPA..

Facebooktwitterredditpinterestlinkedinmail
March 7, 2021Categories: back taxes, filing taxes, self employment, taxes

Recent Posts

  • Payroll Tax Relief 101 for Small Business Owners
  • Do You Owe Money to the IRS? Possible Tax Resolution Strategies to Set Your Mind at Ease
  • If You Don’t Have Money to Pay Your Taxes, You Have Legitimate Options
  • Is it Bad to Settle With the IRS?
  • Do You Owe Back Taxes? Why You Should Stop Panicking & Start Planning

Archives

  • July 2022
  • June 2022
  • May 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • December 2020
  • October 2020
  • September 2020
  • August 2020
  • June 2020
  • January 2020
  • August 2019
  • July 2019
  • October 2016
  • September 2016
  • March 2016

Ron Friedman Tax Relief Pro

150 White Plains Road
Suite 310, Tarrytown, NY 10591
Tel: (914) 712-6919
Fax: (914) 631-0939
ron@ronfriedmancpa.com

Recent Posts

  • Payroll Tax Relief 101 for Small Business Owners
  • Do You Owe Money to the IRS? Possible Tax Resolution Strategies to Set Your Mind at Ease
  • If You Don’t Have Money to Pay Your Taxes, You Have Legitimate Options

Servicing Areas

Westchester County, NY, Fairfield Cty, CT, New York City, The Bronx, Brooklyn, Queens, Staten Island, and surrounding areas.

IRS Circular 203 Disclosure: Any tax advice on this website (or any attachment hereto) is not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed under U.S. tax law.
Facebook LinkedIn
© 2025 914 Tax. All Rights Reserved.