There are plenty of appealing benefits that come with working as self-employed. But one of the main drawbacks is the responsibility of having to handle your taxes. Filing taxes is probably your least favorite thing to do – even if you have an accountant do them for you. But with self-employment, you’re completely on your own.
It doesn’t have to be all bad, though. And if done correctly, filing your taxes can serve as a platform to further grow your small business. The goal is to have excellent recordkeeping and know what to look for, and with these tips, you can have your taxes work financially in your favor.
No Up-Front Taxes
Don’t let this important aspect of self-employment catch you by surprise – taking taxes from your paycheck isn’t automatic. To avoid a high tax bill at the end of the year, you’ll need to put aside tax money. Create a plan of how much you’ll have to take from your checks for taxes.
Home Office Deductions
If you’re using a home space for your job, and it’s in compliance with IRS guidelines, you can take advantage of this significant tax deduction. Not only will a qualified home office reduce your tax bill, but it can also lead to tax cuts with your utilities, insurance, real estate, and more.
Vehicle and Travel Deductions
You might not be able to deduct each time you used your car or traveled for business, but with good records, you can receive a portion of those expenses back. Check out the IRS website about deduction travel costs for business or IRS Publication 463 for travel, entertainment, and vehicle expenses.
Professional Costs and Supplies
Remember buying that tablet/laptop hybrid or that sturdy filing cabinet – those costs are deductible along with professional liability insurance, trade association fees, and just about any monetary costs required for you to stay in business. Write-off these expenses and have your receipts ready as proof.
Meticulous Income Records
If your business is booming as a contractor or freelancer, it’s critical to have your 1099s and other tax documentation properly filed within your records. Keeping a detailed record of your income can help avoid audits and make filing during tax season less of a hassle. It never hurts to review complete records before filing for the current tax year.
Health Insurance Costs
With mandatory health insurance for US citizens, you’re more than likely responsible for paying the entire premium as self-employed. But with proper resources, you can deduct the full cost of your health insurance. Learn more from the IRS about free tax breaks for health care.
Tax Prep Write-Offs
If you’re receiving assistance for filing your taxes, why not get money back for that too? You can also deduct expenses for books with tax tips or even tax software. The IRS has more information about how you can claim professional, legal, and tax preparation costs.
Our suggestions are only scratching the surface for eligible tax cuts for self-employed individuals – we recommend speaking with a local tax professional or CPA firm to find out exactly what deductions qualify for your tax situation. While you’re getting all your tax breaks in order, e-file IRS Form 4868 with ExpressExtension.com. You can receive six months of extra filing time, but you need to submit the form before April 15 of each filing year.
Our friendly, e-filing professionals in Rock Hill, South Carolina, can help you with any questions or assistance needed with the e-filing process. We’re available Monday through Friday at (803) 514-5155 from 9 a.m. to 6 p.m. EST. And we offer 24/7 email support with support@ExpressExtension.com.