One of the perks of owning a virtual paralegal business is tax deductions. However, be careful that you do not become a victim of an IRS audit.
You should track every business expense with your CPA at the end of each year to ensure you only take legitimate deductions. Tax obligations vary depending on the legal structure of the business. If you’re self-employed (sole proprietorship, LLC, partnership), you’ll claim business income on your personal tax return.
Corporations, on the other hand, are separate tax entities and are taxed independently from owners. Your income from the corporation is taxed as an employee.
Self-employed people need to withhold taxes from their income, and remit these to the government in lieu of the withholding that an employer would normally conduct.
Below are some possible tax-deductible items to consider:
- Business and paralegal association membership dues
- Charitable deductions made for business purpose
- Computers and technology supplies
- Continuing legal education
- Entertainment for clients
- Equipment and equipment repairs
- Gifts for clients ($25 deduction limit for each)
- Newspapers and magazines subscriptions
- Office supplies and expenses
- Software and online services