new to wahm and need tax guidance

Hi everyone!

I'm new to all this and was wondering what I need to have in place tax-wise before I get started so I'm prepared come tax time. Thanks in advance!

A few smart things to consider tax wise - especially if you are an independent contractor is to track all of your expenses (business wise) for deductions. Depending on where you live you may or may not be required to have a business license and pay sales taxes.

Self-employment tax
To cover your Social Security and Medicare tax liability. If you're in the 25% federal income tax bracket, the government effectively refunds 12.5% of the Social Security tax you pay.

Business expenses
You can write off a long list of business costs—everything from business meals to insurance to bad debts—so it's important to maintain good records of those expenses so that you can get all the tax deductions you're entitled to. And because you can't deduct personal expenses, you must be sure to keep your business expenses separate. An easy way to do this is to set up a separate bank account for your business and have a credit card used only for business purchases. For expenses incurred that combine business and personal use, you'll need to determine the portion allocated to business and take a deduction only for that portion.

Home office deduction
If you're working from home, deducting the costs associated with your home office can be a big tax saver, but the rules are tricky. To get the deduction, the law requires you to use your home office "exclusively and regularly" for your business. It must be an area in your home where you don't mix business with other activities. The office also has to be your principal place of business or a place you meet regularly with clients or patients. You can qualify even if you spend most of your work time away from the office—as, say, a self-employed plumber who spends most of his time working at clients' homes—as long as you manage the business from the home office and have no other office.

Retirement savings
Starting a retirement plan is another great tax saver. And once you're self-employed, your options go far beyond the individual retirement account. Check out SEP (Simplified Employee Pension), SIMPLE (Savings Incentive Match Plan), Keogh and individual 401(k) plans.

Automobile expense is another common tax deduction used by independent contractors. All mileage driven for business purposes is deductible. There are two ways this can be done. The IRS provides a standard per mile allowance each year or you can keep your actual expenses. The per mile allowance certainly reduces the need to keep all those gasoline receipts, but if a credit card is used for all business related purchases the record keeping is simplified. You can not deduct all of your automobile expense if you only own one automobile and use it for personal use.