The self-employed workforce, which today accounts for 55 million Americans, or roughly 36 percent of the American workforce, is rapidly growing.\u00a0One segment of self-employed is on-demand workers, which provides an alternative to the nine-to-five job, and companies such as Uber, Airbnb, and GrubHub are effectively reshaping the economy.\u00a0Other segments include freelancers, independent contractors and other businesses of one. It\u2019s forecasted that by 2020 there will be more than 60 million Americans who are in some aspect self-employed.<\/p>\n
This trending phenomenon offers a unique opportunity for tax professionals to expand their client base.\u00a0These emerging entrepreneurs are usually heads down on building their operation and don\u2019t have the time or expertise to learn about tax implications on their own.\u00a0Thus, as their trusted advisor you can advise them on some easy-to-digest tax topics and help them save vital tax dollars and improve their cash flow.<\/p>\n
Starting a new business operation\u00a0can\u00a0involve spending money so it\u2019s important to understand the associated tax rules.<\/p>\n
Deducting startup expenses<\/strong><\/p>\n The government allows businesses to\u00a0write-off $5,000 of startup expenses<\/strong>.\u00a0This $5,000 deduction is reduced by the amount that your total startup expenses exceed $50,000.\u00a0Any startup costs that are not deducted in the current year can be amortized ratably over a 15-year period, beginning in the month you start operations.<\/p>\n You can elect to forgo this election and make a different election to capitalize your startup costs. The costs then become part of the basis in the business and are not recovered until the business is sold or you go out of business.<\/p>\n Making the election<\/strong><\/p>\n You\u00a0can\u00a0elect to deduct the startup expenses by claiming the deduction on your tax return on Form 4562 for the tax year in which the active trade or business begins.\u00a0You must file the return by the due date, including extensions. For costs paid or incurred after Sept. 8, 2008, you are not required to attach a formal election statement to your return.\u00a0The election to amortize or capitalize startup costs is irrevocable.<\/p>\n Startup costs defined<\/strong><\/p>\n Business startup costs are amounts paid or incurred for:<\/p>\n