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outsource a tax write off?

Discussion in 'Business & Tax Advice' started by sm00th, Dec 30, 2009.

  1. sm00th

    sm00th Junior Member

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    so i got a freelancer off GAF and pay him through paypal... would it be a good idea to have him as a tax write off?

    i dont know to much about this so it was just a thought, i got my DBA already and not sure what to do since tax time is here lol
     
  2. JonesersRX7

    JonesersRX7 Regular Member

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    It is a business expense.... so yes. Keep track of all your expenses.
     
  3. sm00th

    sm00th Junior Member

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    so just print out all my paypal transactions i made to him?

    sorry if thats a dumb question but i never did taxes with a business name just W-2's
     
  4. JonesersRX7

    JonesersRX7 Regular Member

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    Yep, exactly. And you should really look into an accountant. 400-800 bucks if you have your stuff fairly organized. Look into quickbooks or even quicken small business.

    Makes life much easier plus the money you will save will always be at least double the cost.
     
  5. Grandslam

    Grandslam Senior Member

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    DISCLAIMER: I'm not an certified public accountant or any other type of accountant. This does not serve as tax or legal advice.

    If a business expense occurs that is required to operate the business, the expense can be deducted al long as it is for the purpose of operating the business entity.

    In short, hire an accountant. Why not outsource your tax planning to a CPA? (In the US, of course)
     
  6. davidson

    davidson Registered Member

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    I just wanted to chime in and confirm what others are saying. I AM a tax professional and I teach tax education courses.

    Any legitimate expenses, including contracted labor, can be deducted from business income. That, of course, means you also have to declare that income. Small business income such as you describe are done easily on a Schedule C (Form 1040) and reported along with your income from other sources such as employment.

    What that means is that you can effectively reduce your tax liability if you have losses that exceed your income (as most small businesses do when they start out.) Of course, if you have profits, you will end up paying some additional tax. If you report more than $400 in self-employment income, you will also be responsible for self-employment tax (your share of medicare and social security taxes.) This is a good thing because it will count toward your retirement.

    I would agree that you need to get some professional advice when you are just starting out. You might be able to rely on a good professional tax preparer if you don't want to spend the money on a CPA. Be sure to ask a lot of questions like where he got the numbers to put on each line of the tax return. If you learn what the tax preparer is doing, you may be able to figure it out for future years. A small business included on a personal income tax return is a fairly simple matter.

    Hope that helps.
     
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