Business and self-employment expenses

Every business incurs expenses. Even independent contractors, consultants, and freelancers pay for software, computers, or travel out of their own pocket to make their jobs easier. For incorporated businesses, being able to deduct expenses will reduce their business taxes. Business expenses will reduce both the regular income tax and the self-employment tax. The bottom line? Keeping track of all your business expenses will go a long way to reducing your tax liabilities.

Special notice

The IRS warns taxpayers to be on the alert for e-mails and phone calls they may receive which claim to come from the IRS or other federal agency and which mention their tax refund or economic stimulus payment. These are almost certainly a scam whose purpose is to obtain personal and financial information — such as name, Social Security number, bank account and credit card or even PIN numbers — from taxpayers which can be used by the scammers to commit identity theft. The e-mails and calls usually state that the IRS needs the information to process a refund or stimulus payment or deposit it into the taxpayer's bank account. The e-mails often contain links or attachments to what appears to be the IRS Web site or an IRS "refund application form." However genuine in appearance, these phonies are designed to elicit the information the scammers are looking for. The IRS does not send taxpayers e-mails about their tax accounts. Additionally, the way to get a tax refund or stimulus payment, or to arrange for a direct deposit, is to file a tax return.


Child care expenses

Individuals who pay for day care expenses for their children or disabled adult dependents may be eligible for a federal tax credit of up to $3,000 for one dependent or up to $6,000 for two or more dependents. To qualify for the child and dependent care credit, you must have a dependent child age 12 or younger, or a dependent of any age who cannot care for himself or herself. You calculate your tax credit on Form 2441 (PDF) and Instructions for Form 2441 (PDF).

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