
Ask HN: Best place to learn about self-employed tax deductions - akulbe
Just getting ready to leave my day job of ~9 years, and go full-time contractor with a customer I&#x27;ve been doing side work for.<p>I want to mitigate as much tax liability as I can. However, reading our tax code is not very easy&#x2F;helpful.<p>Any advice?
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patio11
Get an accountant as soon as you have $10k in revenue. Open a new CC account;
put all business expenses on the CC. Keep a detailed travel log so that you'll
be sustained on the possible eventual audit of your travel expenses.

The single best thing a consultancy can do to decrease tax burden is keep
really good books on expenses. Don't drop $14k worth of CC receipts on the
floor prior to entry; that costs you $5k+.

Also as a software engineer you get far, far, far more economic advantage from
working on your business than from tax optimization. Get people to do that for
you; spend as little time and brain sweat on it as possible.

I use bench.co for bookkeeping. Best money I every spent.

Talk to your accountant about retirement funding options; they're the
modestly-more-brainsweat required option for decreasing present-year tax
burden.

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akulbe
Hi, Pat. Thank you for responding.

I just had my first 5-figure month. Early on, I'd set up a separate bank
account its own card attached.

I've been using Freshbooks, so far. I'll check out bench.co

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atmosx
Is it true that when using Freshbooks and PayPal business (e-check) option
cuts the PP cost down to 0.50 USD per transaction?

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akulbe
I haven't used the PP biz option, so I don't have an answer for that one.

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brudgers
To be honest, tax liability is probably a poor place to focus much
optimization effort. Saving money isn't a sound basis for a business and the
best way to reduce tax liability is to reduce income to zero...or less.

What matters more are things like cash flow, liquidity, and diversity of
customers. Most of what a small consultancy needs to know about taxes is to
pay them on time and to separate business expenses from personal with separate
accounts.

My last piece of advice is to not spend money on the business. A new $2000
computer isn't necessary to get the work done. Use what's already available
and gets the job done.

Good luck.

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brudgers
I'll add that if you're in the US and filing a schedule C (sole
proprietorship), standard tax software like TurboTax covers pretty much
everything a one person consultancy is likely to encounter.

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kspaans
Similar question: are meals tax-deductible for self-employed people? If not,
how come meals at full-employment workplace aren't taxable?

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patio11
Meals for self-employed folks are not generally tax deductible. The exceptions
are business entertaining (50% deductible; must have clear connection to
immediate prospect of a business goal) and meals during business travel (50%
deductible; you must spend a full day or more away from one's home).

Meals furnished on an employer's premises for their own convenience are not
considered income to the people receiving them. Why? Tax code says so. The
business can typically deduct whatever it costs to provide them, either
materials and chef salaries (etc etc) or whatever they pay to the meal
provider. Why? Tax code says so.

Why the disparity in treatment? "Overwhelming potential for abuse" covers most
of it.

Fun fact: in Japan, while it is theoretically not allowed by the tax law,
actual practice among many small businessmen (encouraged on not just a wink-
and-a-nod level by the National Tax Agency) is that all or almost all personal
food expenditures are business expenses. It's widely considered "one of the
perks" you get for paying e.g. self-employment taxes. (In the _vanishingly
rare_ event that the NTA audits a small businessmen the discussion goes like
"Why did the business pay for this meal?" "To soothe my body from the rigors
of work and maintain productivity." "Approved.")

