To meet certain tax law requirements and capitalize on tax-cutting opportunities, self-employed individuals need to be aware of certain provisions in the tax law that apply to them. If you're self-employed, give consideration of the following:

Set up a retirement plan. A Keogh (or H.R.10) plan is a retirement plan for self-employed people and their employees. If you have earnings from self-employment, whether full-time or part-time, you are probably eligible to establish a Keogh plan.

Tax-deductible Keogh contributions are based on a formula which generally allows you to put away up to 20% of your self-employment income, to a maximum contribution of $30,000 per year.

Also, check the other retirement plan options available to you - IRAs, SEPs, and SIMPLE plans.

Hire family members to work for you. As a boss, you may hire family members and pay reasonable salaries for the work they do in your business.

For example, you could hire your son or daughter to perform routine clerical or cleanup tasks. Your child's salary would be a tax-deductible business expense, and your child's income would be tax-free up to that year's standard deduction amount for a single taxpayer. Income in excess of that amount would be taxed to your child's rates, which are probably lower than yours.

You can compound the benefits of this strategy by putting up to $2,000 into your child's IRA, which is likely to enjoy many years of tax-deferred growth.

Wages paid to a spouse by a whole proprietor are subject to payroll taxes; those paid to your children who are under the age of 18 are not. Compensation paid has to be reasonable of the services performed.

Take a write-off for business equipment. Most business equipment is depreciated over five or seven years. However, small businesses are allowed to expense a certain amount of equipment costs in the year of purchase. (This is the so-called Section 179 deduction.) Even equipment purchased at year-end is eligible, but it may be used more than 50% for business. Only the business-use percentage can be written off. You should keep records that prove business usage for equipment that can also be used for personal purposes - for example, computers, cellular phones, etc.

Depreciate your business auto. The Section 179 deduction for passenger vehicles is limited to allowable first-year depreciation - and that amount is reduced if there's any personal use. If you take the standard mileage allowance, you can't also take depreciation. In either care, keep records to substantiate your business usage and maximize your deduction.

Don't overlook miscellaneous deductible business expenses. Don't forget such miscellaneous expenses such as stationary and business cards, legal and accounting fees, 50% of business meals and entertainment, etc.

Deduct self-employed health insurance premiums. If you're self-employed, you can generally deduct as a business expense a percentage of health insurance premiums paid for you and your family.

Give tax-deductible gifts. Give gift items to employees, customers, and clients, and take a deduction for them. Such gift items cannot exceed $25 per year.

Look for tax credits. Don't miss business tax credits that are still available. Congress often uses tax credits to encourage certain activities. Regularly investigate those credits that might still be available to your business.

Don't miss the S. E. tax deduction. Self-employed individuals pay a self-employment tax which is the equivalent of both the employer and the employee portions of the FICA tax. Don't overlook the deduction you're allowed for 50% of the self-employment tax you pay.

If you conduct business from your home, you may be entitled to a deduction for home office expenses. You may qualify to write off the business portion of your home utility bills, insurance, maintenance, and other expenses. The requirements for deductibility are very strict; get details if you think you might qualify.

Don't underpay your taxes. There is no income tax withholding on self-employment income, but that doesn't mean you're not required to pay taxes during the year. Self-employed individuals generally are required to pay taxes through quarterly tax payments due April 15, June 15, September 15, and January 15 of the following year. You should set up quarterly estimated tax payments and make these payments on time. Late or inadequate payments mean you'll be assessed penalty and interest charges in addition to your income tax liability. You are required to make estimated payments even if it is your first year in business.

Self-employment can be very rewarding, but it can also complicate your tax life. We can help make the tax part of self-employment easier. Contact our office for assistance with tax filings and tax planning related to your self-employment.