5 Tax Tips for Freelancers and Independent Contractors
There are many amazing benefits for those who freelance or operate as an independent contractor. You can be your own boss, control your own time and say yes or no to work based on your interest and availability. In addition, the age of the Internet makes this occupation easier and in more demand than ever. So, what’s the catch?
Well, many think that things tend to get more complicated for those who freelance come tax time. But it doesn’t have to be that way. Here are some tips for freelancers and independent contractors that can make filing taxes a breeze!
1. Keep Track of Your Paperwork
Deductions are one key way to trim your tax bill come April 15th. Keep all paperwork for business related travel, office supplies, gas mileage, and any other business related deductions. One strategy is to keep a file on your desk for these receipts and one in your car. Throw the receipts in as you get them and you will save yourself considerable time and effort. And, in the unlikely event of an audit, you will be way ahead of the game.
2. Watch for Your 1099s
For every single freelance job that you complete in which you make more than $600, you will be issued a 1099 from the company that contracted you for your services. The IRS will also get a copy of this form, and you will want to be sure that when you file your return, your income matches those 1099s. One big red flag for the IRS is small business owners that pocket more cash than they disclose to them.
3. Retirement Planning
One great way to protect some of your hard earned income is to open a self-employed retirement plan. You are allowed to put in up to 20% of your earnings into this retirement plan (most often called a Simplified Employee Pension Plan or a Keogh plan). The maximum amount you can contribute this year is $52,000. This is a great way to save some money and protect some of your income.
4. Hire Your Family Members
Another great way to save on your taxes is to hire your spouse or children to do a little work for you. If your spouse works for you, you can get a tax break on medical insurance. If you hire your children to do things to help your business, you can in effect move a bit of your income to your children who may not be subject to social security tax or unemployment taxes.
5. Set Up a Dedicated Home Office
If you use a part of your home as your primary place of work, you can likely claim it as a tax deduction. You have to be able to show that this is the primary use for the space, but if it is, you can claim things like mortgage insurance, utilities, insurance, repairs, and real estate taxes.
If you have additional questions about your taxes as a freelancer or independent contractor, you can always seek the help of a reputable tax professional.
Success Tax Relief has helped many sort out the tax implications of being self-employed and can also help maximize your deductions, leaving more money in your pocket this year. If you have questions or would like more information, give us a call today at 1-877-825-1179.