Have a Tax Question? Ask a Tax Expert
Hello, and welcome to JustAnswer.com
Congrats on deciding to venture out with your own business
To minimize your consulting income, make sure you are taking all deductions you are entitled to
You can deduct any expense that you incur in order to generate the income
You can deduct your home office expense and also deduct mileage that you drive for business purposes
Those are the two big expenses that you will be able to deduct that will help you tax wise
Do I need to incorporate and/or register for a tax ID number as a consultant?
I am not sure that I will continue consulting long-term so I don't want to incur the cost of incorporating uncessisarily
You don't need to register for a tax ID unless you want to
some people prefer to, so that they don't have to give their social security number out
And you don't have to incorporate. You can be a sole proprietor
As a consultant do I have to arrange to pay taxes on a monthly basis since they will not be deducted? How do I go about doing this?
What you do is quarterly you file a 1040-ES and estimate your taxes
and send it in with 1040-V which is a payment voucher
You only do this quarterly
Do you do it at the beginning or end of the quarter? For example I will be consulting from September to December
Your first year you don't have to estimate your taxes quarterly ...and since you are doing this primarily in the fourth quarter you will simply pay the additional tax with your tax return
What about the expenses associated with the Colorado based non-profit
Well, you won't deduct expenses that you incur on behalf of the nonprofit
The non profit should reimburse you for any expenses
Now, if they are a charity, you can deduct your donations to them...but only if they meet the qualifications of being a charity
But I am Partner not an employee so therefore I won't get reimbursed
Not for a nonprofit
For a regular, for profit company then you can deduct ordinary and necessary expenses
But to be a Partner I will have expenses. Business meetings, travel and professional development.....
You are on the board of directors?
You can read this article about deducting expenses:
Do you need anything additional?
i'm not clear on the non-profit aspect yet
so how i offset travel expenses related to the non-profit for business meetings?
for example my Partner lives in DC and Colorado so we travel to meet face-to-face
additionally I'm doing continuing education related to the nonprofit
A "non profit" can only be set up as a corporation or LLC
If you are not an employee of the nonprofit, then you would not be able to deduct the continuing education expenses of the nonproft
Apprently in Colorado though its not an LLC or a corporate it is just a non-profit.
Yes, but a partnership implies taxation ... there are no taxes on a nonprofit
I am a partner / owner of the non-profit. I am not an employee because I'm not getting a salary.
You aren't taxed on the net income of the nonprofit
You have to be a nonprofit corporation, not a corporation etc
You can't own a nonprofit
Okay but there aren't any tax credits or deductions for these types of business expenses?
No, because non profits are not taxed on their nonprofit income
Okay thank you.
Is there anything else you need assistance with today?
No that's it. Thank you.
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