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For the more than 14 million self-employed Americans toiling away in home offices across the country, tax season comes with its own set of headaches.
First you've got to know what you're up against, and it takes some tricky math work to figure out how much you owe Uncle Sam for taxes usually taken out by employers – namely, Social Security and Medicare.
Now that you know what you owe, chances are you might be experiencing a bit of dollar-sign shock.
The good news is there's a host of deductions you can claim as a self-employed worker. We tapped Gail Rosen. a certified public accountant, for a few pointers on what you can (and can't) deduct:
In order to qualify as a business expense, a purchase must be necessary for your everyday operations. That means, unfortunately, that nifty new wardrobe you bought to visit clients probably won't count.
Here's what will: office supplies, businesses dues, business publications, accounting fees for your business, business cards, business entertainment (50% deductible), gifts (limited to $25 a person a year), postage, printing, continuing education, computers, software. you get the idea.
Rosen's ready to debunk a couple of commonly held
misconceptions about claiming deductions for your home office.
" Don't give up just because you are scared of an audit," she says. " The home office deduction does not create an audit, which many people think it does."
Next, thanks to a change in tax law, the home office deduction won't create a big future tax on your home if you decide to sell later on (better wait a few years first, though ).
Watch out when you claim business travel expenses this year. For half of 2011 (Jan. 1 - June 30), you can claim 51 cents for each mile driven. After that, claim 55.5 cents on each mile for the rest of the year (July 1 - Dec. 31). And don't forget about those toll and parking fees.
Thanks to a recent law change, you don't have to keep track of every single business-related call you make throughout the year. Per Rosen: Deduct your cell phone based on the percentage you use it for business as long as more than half the time is business related. If the cell phone is just for your business then you can deduct 100 percent. The burden of proof is on you.