Most people look forward to tax time and the big refunds it brings, but for self-employed people tax time can be pretty stressful, unlike traditional employees, self-employed individuals are responsible for taking taxes out of their pay, plus social security and an additional self-employment tax. That’s why it’s so important to have all your I’s dotted and T’s crossed for tax time. Not doing so could cost you some big bucks. Read on to learn more about how to prepare for tax time.
Preparation should actually be happening all year. Keep detailed records of all your invoices and expenses. Self-employed individuals can deduct expenses for things like post office boxes, computers, and even PayPal fees. Be cautious with the home office deduction though. Unless you have a room that is completely dedicated to your work and nothing else, it’s better to avoid it. You can try and calculate how much of your office is dedicated to work, but it can get complicated and raise red flags with the IRS.
If you’re bringing in a decent income, you should set up quarterly payments with the IRS. This will make things much easier for you come April 15. Remember though that all income over $600 must be reported.
To help you keep your paperwork organized, consider using a free online PO template or invoice service. They look professional and are an easy way to document all your payments, It’ll also help you if it comes time to chase after a client who has gone past due. If you didn’t keep the greatest records this past year, don’t panic. Instead contact a CPA or tax attorney to help you. They not only can get your records up to snuff but can find you deductions you may not have known you were entitled to. When in doubt, always seek the help of a professional. This comes to doing your taxes too. If you are a freelance writer or editor, your taxes should be pretty simple and straightforward, and you can easily do them yourself using applications like TurboTax. But if your business is larger or complicated in any way, have a professional tax preparer or CPA do them for you. You’ll be glad you did. It will take away a lot of the stress that comes with tax time and might even result in you getting a bigger refund check.