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Old 01-29-2009, 09:36 PM
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Help with New Sole Proprietor tax deductions

I've recently just started record keeping for a sole proprietorship small business that is based out of a home with the use of a personal vehicle, I was wondering what all can be deducted on the income taxes to get the most back for the client? Also, I'm aware that self-employment taxes and quarterly taxes are required. How do I go about paying these taxes to avoid any penalties and how is it calculated on how much is owed?

Your help is greatly appreciated.



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Old 01-30-2009, 04:45 PM
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re: Sole Proprietor tax deductions

You can do your client a big favor by becoming an expert in home based business deductions! On my blog Home Based Business Owners - Reap the Rewards I give advice on home based tax deductions along with a recommendation for the best book on the market about maxamizing home based business deductions.

To answer your question about self employment tax. If you had a tax liability for 2008, you may have to pay estimated tax for 2009.

General Rule
You must pay estimated tax for 2009 if both of the following apply.

You expect to owe at least $1000 in tax for 2009 after subtracting your withholding and credits.

You expect your withholding and credits to be less than the smaller of;
90% of the tax to be shown on your 2009 tax return, or
100% of the tax shown on your 2008 tax return. Your 2008 tax return must cover all 12 months.

Sole proprietors, partners, and S corporation shareholders generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return.

Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay your estimated tax. For additional information, refer to Publication 505, Tax Withholding and Estimated Tax.

You will find information about when and how to file by going to this IRS article.



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Old 01-30-2009, 10:22 PM
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Here is a useful list of items that you can deduct as a small business owner.

Tax Checklist for Sole Proprietorships/Schedule-C Filers

In addition, take a look at these expenses as well.

1. Travel or Commuting Expenses.
2. Parking Expenses.
3. Cell phone charges.
4. Monthly bank charges.
5. Computer used at home could be deductible provided your client uses it for business purposes.
6. Any education expense.
7. Internet access for business purposes.
8. Any office supplies or stationary used for business.
9. Advise your client to establish a pension plan, it may be able to shelter up to 25% of your clients net income from being subject to tax.

Your client would first have to determine how much his profit is going to be in 2009. Thereafter, you use the IRS tax table to estimate his projected tax liability, which would include both the regular tax and the S/E tax (self-employment taxes). This liability is payable over 4 equal installments and paid using an IRS Tax Vouchers 1040-ES, that are payable as according to the following schedule as follows:

4/15/09
6/15/09
9/15/09
1/15/10

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