All the self-employed people are annoyed with the high self-employment (SE) Tax. There is a valid reason to be frustrated; SE Tax is twice as the federal payroll tax. Where a employee pays 7.65% federal tax, a self employer has to pay 15.3% of SE tax. There is a Schedule C filer which helps to lower the SE Tax. Three Tax Tips to reduce the tax are as follows. The pro and con of the schedule is also mentioned in the following points.

1. Home office deduction: Income tax is reduced in Schedule A deduction, but in Schedule C deduction, in addition to income tax, SE tax is also reduced. There are some misunderstandings about home office deduction. It is not true that you will invite an audit if you mention home office deduction, but on the other hand, if you do not include the deduction you may have to end up paying high tax. Also some believe that same tax amount have to be paid if they include property tax and mortgage interest on Schedule A or home office deduction on Schedule C, which is not the fact.

2. Deduct tax preparation fees: Put the money you spent to have your taxes prepared on Schedule C and decrease the income tax as well as the SE tax. You can also put the money you spent to have your taxes prepared on Schedule A but you won't receive as much money back. So always choose to pay less taxes.

When itemizing deductions on Schedule A, miscellaneous deductions are limited to two percent of the Adjusted Gross Income for the taxpayer. Therefore any deductions listed under this heading must exceed a certain amount before any benefit is realized from the deduction.

It is important to remember that only business related expenses should be entered on your Schedule C Tax Form. An example would be the fees you pay your account for business related items. Accounting fees should be segregated into either business or non-business classes. Business items would be included on such forms as: Schedule C, Schedule SE, and Forms 8829 and 4562. Non- business items would be included on forms such as 1040, and Schedule A.

Don't forget to include the work like bookkeeping, software consulting, paycheck processing or payroll tax returns done by your accountant.

3. Tax Preparation Software Programs: The tax code is often complicated and includes many calculations which are not obvious to the uninitiated. Many good tax software programs, very economical, exist to help the taxpayer to complete an error free return. As examples, taxes on business expenses and profits are somewhat confusing. The self employment tax is a good example , as the Medicare and Social Security portions are easily determined with a good software program. Additionally, you are allowed to take a 50% deduction on the amount of your SE tax obligation - that will be entered on your 1040 form. A good tax software program will lead you step by step through the tax preparation process - and help to eliminate errors.