Self-Employed/Freelancer Tax Returns in Manhattan – How a CPA Can Help

Owning your own business can be very rewarding, both personally and financially. Being the sole decision-maker for this important undertaking can also be overwhelming. Business owners have many choices to make, and these choices involve tax consequences that are not always foreseen. Our CPAs for freelancers and the self-employed in New York can help you minimize your overall tax burden by identifying and maximizing business deductions, providing guidance on substantiation of expenses, and exploring tax planning alternatives that are uniquely available to the self-employed. Since you pay taxes based on your profit from your self-employed activities it is crucial that the freelancer keep track of expenses from freelancing activities. MEDOWS CPA, PLLC is the CPA for freelancers and the CPA for the Self-Employed in NYC. We can guide you through what is deductible and assist you with both the accounting and tax preparation of your sole-proprietorship.

Some frequently overlooked business expenses that you may be able to deduct include moving expenses, costs of travel away from home, entertainment expenses, and expenses related to a home office. Code Sec. 179 expense allowance on the purchase of new equipment can provide a significant deduction. In addition, there are multiple benefits when you employ your spouse, child, or other family member in the business.

There are some risks involved in adopting tax positions relating to operating a business as an independent contractor. For example, the distinction between employee and independent contractor is an issue the IRS subjects to special scrutiny. As a self-employed individual, you must comply with these rules for yourself or for any workers that you hire. If you are an employer, you must withhold income and employment taxes from an employee’s income. However, if your workers are independent contractors, you are only required to report payments of $600 or more on a Form 1099-MISC, Miscellaneous Income. Failing to make the right classification, however, could result in additional taxes, interest and penalties.

Retirement Savings for the Self-Employed

In recent years, many options have become available to self-employed individuals to provide for their retirement. Tax planning for retirement can include deductible contributions to a Keogh plan, traditional or Roth IRA, SEP plan, SIMPLE plan or a one-person 401(k) plan. You may wish to consider implementing one of these plans for yourself and/or your employees to benefit from a current tax year deduction and accumulate tax-deferred retirement savings.

Each of these plans has advantages and disadvantages, and some may not be applicable to your situation. For example, a sole-owner 401(k) retirement plan allows a contribution for you as both an employer and as an employee. Therefore, a sole-owner 401(k) plan may provide for the largest deductible contribution. However, a sole-owner 401(k) is not available to the self-employed with employees other than a spouse or relative. As an alternative, a Keogh plan provides more flexibility, but is more complicated to maintain than a SEP or SIMPLE plan and may have additional administrative costs. Ultimately, the choice of savings vehicle will depend on factors related to your business and your retirement needs. Regardless of which plan you qualify for or what your retirement needs are, it is important to begin planning now for your retirement.

Complex rules and calculations are involved in many of the planning opportunities that are available to you. Our CPAs for the self-employed in NYC will be happy to review your overall tax scenario in order to maximize your tax savings. Please contact our office at your earliest convenience so we can being to assist you.