It’s hard to believe, but the government actually gives tax breaks to people for staying at home in their pajamas and starting their own business rather than working for someone else (well, the pajamas tax break might be a stretch). We’re always trying to convey the benefits of being self-employed and with a strong team behind you, it’s a dream anyone can turn into a reality.

Part of that reality is that you must be responsible for your own tax withholdings. For those that are changing over from a employee to being self-employed, you must set aside about 30% of each check that you deposit, because at the end of the year you will owe Uncle Sam his due.

If that’s news to you then read on, because while being a freelancer is a great way to make money, your new freedom brings great responsibility. Here’s a short list of tips about taxes for the self-employed.

1. Report all income to the IRS no matter the amount or form in which it is received. Big brother government might miss a few items every now and then, but it’s not worth putting your business at stake. Be straight forward about your income and you won’t have anything to worry about on April 15th.

2. If you work from home, there are several business related expenses that are deductible as long as they are ordinary and necessary to your job. For example, you can deduct internet connections, common office supplies, business cards, cell phone fees, computer software and hardware.

3. Another benefit of having a home office is that you can deduct a percentage of utilities, insurance, and a part of the mortgage or rent. But don’t get too carried away, the space must be specifically set aside as an office workspace. Though you may spend a lot of time in your kitchen while on business calls, your new blender is not a business expense.

Let’s get this straight, this is a blog, not a CPA. So you’ll need more help than we can list in a blog post. If you want to manage your business the right way there’s only one thing you’ll need to succeed, KNOWLEDGE! With the right tools you can be a successful business owner. We recommend the professional freelancing tools over at CMI Interactive.

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