Tax Planner Says: Independent Workers Must Fend For Themselves

June Walker always is a wealth of tax-related information. Her most recent post from June Walker Online continues the stream of powerful tax insights for home-based and independent workers.

This year’s Sunday New York Times Special Tax Section (February 12) had full-size pieces about a new IRS form for capital gains taxes and another on tax-efficient investing. Some of the articles, such as the wrestling match between Congress and a revised tax code, ought to interest all of us, self-employed or not.

However, for the 40 million-plus self-employed people in the USA nothing specific. Oh yes, there are two paragraphs, near the end of a long Tax Tips piece, about the advantages of a home office.

The gazillions of tax articles that appear at this time of year give us a yearly demonstration of how neglected we indies remain despite our ever-growing numbers. And a selling-like-hot-cakes tax prep program reinforces this.

As example: TurboTax this year is featuring the motto, “It’s all about the refund.” Even the tax prep software it’s selling for self-employed people proclaims the importance of the refund. But as you and I, and anyone who has read my stuff, know: A refund is dumb. Means you loaned your money to the government, interest-free, all year. And, omitted from the get-a-refund promo for the self-employed is the fact that indies don’t have tax withheld from their paychecks. Employees do. Indies can decide when and how much to pay as estimated taxes. A tax savvy indie plans on owing taxes come April. In that way the government has loaned you money, interest-free, all year. Here’s some info:
Estimated Tax Payments: Shouldn’t scare the bejesus out of you
Estimated Tax: Your Fair Share: How much should I pay?

Do you find, as I do, a tax-brainlessness in the TurboTax blogpost, The Advantages of Filing Taxes Early? It assumes that getting a refund is what it’s all about. It tries to convince the prospective customer that following prompts and filling in numbers on a software program add up to fast (ergo smart) deductions. But the exact opposite is the truth. Careful, thoughtful preparation is what is needed to get you the lowest tax liability. And waiting to file until the extension deadline gives you and a savvy tax professional more opportunities to fashion a tax return treatment that will bring you the greatest tax advantage.

It appears, however, that TurboTax disapproves of getting an extension, taking your time, getting your bearings, and filing later. TurboTax Lisa reflects, “During my career as a CPA, I am always amazed by the amount of people who wait to file their taxes . . . when they may have a tax refund waiting.” Read my post, File an extension. It really is the smart thing to do.

A Turbo Tax blogpost offering to help customers avoid mistakes when they e-file says first and most important: “Enter the appropriate amount of exemptions (including yourself, your spouse and your children). This could cost you if entered incorrectly.” Hey, better line up your kids and count them. And don’t forget that guy you’re married to. No mention of deductions unique to the self-employed that might help reduce your taxes. Here’s a list in case you need some help:100+ indie Business Expenses To Help Reduce Your Tax

So, indies, don’t ask a TurboTax Lisa to prepare your tax return. Educate yourself. Ask questions. Then find yourself an indie savvy tax pro.

Related posts:

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  2. Geek Squad Tax Tips Simplify Small Home Business Filing
  3. Golf Time or Tax Time? Top Tips to Prepping 2009 Home Business Tax Docs
  4. Never Too Soon – or Late – For Soloist Home-Based Business Taxes
  5. Year-End Tax Tips for the Small, Home-Based and Independent Business