Tax Tips for the Self-Employed
Tax Tips for the Self-Employed: A Freelancer's Guide to
Paying Taxes
If you are an employee, you get a paycheck every pay
period and most likely pay little attention to your taxes until the end of the
year. Your employer does a lot of the work for you and you get a W2 at the end
of the year. However, if you are a freelancer or are
self-employed, the responsibility of paying your taxes rests solely upon your shoulders.
There are 14+ million American taxpayers currently in the IRS
collection division, and it’s easier to land there if you’re self-employed and
don’t fully know what to do when it comes to taxes. Below are some simple tips
to help you 1) reduce your tax liability and 2) keep you out of tax trouble.
Make sure to check with your tax professional to discuss your unique
situation. If you’re already tax trouble, you’re not alone but you must take
action before the IRS levies your bank account or seizes any property you have.
Contact us for a free, no-obligation consultation and let our tax resolution
team get you out of tax trouble. Call us at 470-305-1233
With that said, let’s jump into the tax tips for freelancers and the
self-employed.
1. Report business-related
expenses and keep clean records.
If you purchased a new laptop to help you with your business, you can report that as a
tax deduction. If you're using your cellphone primarily for communicating with
business clients, you can claim that as a tax
deduction as well. If you can prove, with documents, that your write-offs are
legitimate, you can include them on your tax return. Make sure to keep strict and detailed records of any deductions in case the IRS wants
proof later on.
2.
Differentiate between your business and personal expenses.
The IRS considers most business-related expenses as
legitimate write-offs but if you go beyond a certain limit, you can be
subjected to an audit. For example, you can include office furniture
or office supplies in your tax deductions for your home
office, but you definitely may not claim that new sofa set in your second living room as a
deduction.
3.
Make Estimated Tax Payments.
As an employee, you get taxes taken from your paycheck every time. If
you’re self-employed, you don’t. This can lead to a large tax bill at the end
of the year that you’re unable to pay. Self-employed taxpayers generally need
to make quarterly estimated tax payments. IRS Publication 505, Tax
Withholding and Estimated Tax, has details on making those payments.
4. Time large purchases toward year's end.
If you have been planning to get a new printer or a new
ergonomic chair for your home office, do so in the last quarter. This way, you
can include the purchase as a tax deduction for the year. The bigger the
purchase, the bigger the tax deduction.
5.
Monitor and track your use of your car, phone, and other utilities.
It is often highly impractical to get a separate car, Internet subscription, electricity, or even a phone for your home-based business. What you should do instead
is to keep track of how much you use these items for business-related purposes.
How many minutes are spent on business calls? How much mileage do you
drive for business trips? Keep a list of these usages
and include them in your list of tax deductions.
6. Have a qualified tax professional on your side
There are a lot of variables when it comes to taxes. As a small
business owner, having someone to turn to when you have questions is absolutely
essential. You should focus on growing your business and doing what you love.
If you’re already in tax trouble and you need an expert tax resolution
provider who knows how to navigate the IRS maze, reach out to our firm and
we’ll schedule a no-obligation confidential consultation to explain your
options to permanently resolve your tax problem. Call us at 470-305-1233, or
email me: len@fairtaxsolutions.com
Len Nelms, CPA
Fair Tax Solutions
www.fairtaxsolutions.com
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