Being self employed is great. You get to set your own hours and be your own boss. And with the booming gig economy, it’s no wonder that now more than ever, people are self-employed, as 1 in 3 Americans earn some form of freelance income. But being self-employed during tax time can be confusing and intimidating.
Here are some tips for self-employed tax filers.
The hardest part of doing your taxes when you’re self employed is keeping track of all your important documents throughout the year. The best thing to do is to keep track of your records throughout the year, but if you haven’t done that already, take time to track down all necessary documents well before the April 18th deadline for tax filing.
Declare All of Your Income
Any company that you freelanced for is required to send you a 1099 if you earned $600 from them. The deadline for the 1099s to be sent out is January 31st. If you did not receive a 1099, you should still report the income, and don’t necessarily need to request a 1099 from the payer.
Wondering what your tax rate is going to be? Here’s a great article that lays out the Self Employment Tax Rates for 2017.
Take Advantage of Deductions
One of the most valuable deductions available to the self-employed is the home office deduction. To qualify for the home office deduction, you must use a space in your home dedicated exclusively to work. The deduction allows you to write off a portion of your home, as well as utilities and depreciation. Whether you qualify for the home office deduction needs to be carefully considered, because its high value can raise red flags for auditors.
Other deductions include the self-employment deduction, internet and phone payments, health insurance premiums, business travel expenses, automobile expenses, interest on bank loans and credit cards, publications and subscriptions, self-employment retirement plans, and qualified education expenses. Navigating all of these deductions can be tricky, which is why it’s important to have your return prepared by a knowledgeable tax professional.
Save for Later
Though freelancers don’t have access to 401(k)s, they can still set aside some of their income for retirement, and reap the benefits come tax time. Freelancers can set aside income all the way up until the tax filing deadline and may be able to use options such as: IRAs, Roth IRAs, SEP IRAs, or Solo 401(k)s.
Doing your taxes when you’re self-employed can be a major headache, but we can help!