Accountacny & Taxation

Solicit referrals for accountants from colleagues.

Do not use mass market tax accountants like H&R Block to set up businesses, incorporate yourself, or do anything other than a plain vanilla 1040.

Do not go with the cheapest person either.

also, you may want to avoid taking tax advice from people who tell you to file a corporate tax return on a Form 1040.

Well, taxguy, appreciate that sage advice but if you take a moment to re-read what I posted, you will see that, in fact, I did not tell anyone to file a corporate tax return via a 1040.

Can't you take bus deductions as a sole proprietor? Speak to your accountant.

fair enough, fakeestate. and i do agree that H&R Block is generally to be avoided.

on a less facetious note, trade and business deductions are indeed available to individuals who operate through any type of unincorporated business entity (i.e., sole proprietorship, LLC, partnership). the corporate form is typically not the way to go for a small business. with corporations, the negatives include higher tax rates (generally), higher fees and lots of regulatory red tape*.

*especially if you're incorporating in New York!

You need an accountant NOW. As a freelancer, you should get an accountant, estimate your income for the year, and pay quarterly estimated taxes. Because you're a freelancer, you'll pay higher social security taxes -- you have to cover both the "employer" and "employee" halves.

To balance that, you can try to take a lot of business deductions, but honestly, what a real estate agent can write off is pretty limited. Business gift writeoffs are limited to $25 per person per year, and it's not like realtors have a lot of materials cost -- a new computer, transportation, that's about it. Give as much as you can to charity, that comes off, and owning a home and getting the mortgage interest deduction helps to.

Best practice is also to start some sort of personal retirement plan, like a SEP, and throw as much as you can in it each year.

Incorporation, on the other hand, is more about legal protection than about taxation. I have an LLC because it's cheaper than incorporating -- a good attorney can set one up for a few hundred bucks.

ali r.
{downtown broker}

Also please clarify about vehicular expenses including fuel and maintenance.