In today’s world, workers in the gig economy and freelancing are more common than ever. However, are you really on the hook for paying taxes when you deliver a few pizzas on a Friday night? Do you have an obligation to file and report the income if you are an Uber driver once a month? The answer is yes! Self-employed individuals are still employed and receiving income for their labor, so you need to make sure that you understand how your side hustle will impact your personal taxes. Here are some of the tax tips that you should know.
5 Tax Tips for Self-Employed Individuals
- You will not get a Form W-2 from your employer like you would if you worked full-time or part-time and were not considered a contractor. Instead, you will probably receive a Form 1099 that shows your gross earnings.
- Because you don’t get money withheld from your payments now, you will be responsible for making those payments based on your projected income. MKS&H can help you determine the amount you should be pre-paying quarterly on your taxes.
- Tracking your expenses is critical for self-employed individuals, as there are many deductions that you can claim on your taxes to lower your tax obligation. Keep copies of your receipts digitally or on paper and make sure that you know what the transactions were if they were vague or the receipts are not itemized. Mileage is also a deduction, so you should always keep a notebook in your car where you write the date of the trip, the destination, the purpose of the trip and the mileage at the start and end of the trip. There are also apps designed for self-employed individuals to make this information easier to track,
- Keep a separate bank account for your business, even if you are not making a great deal of revenue yet, to make separating your income and expenses from your personal or other income and expenses easier.
- Don’t wait too long to start your taxes or start working with MKS&H. The longer that you wait and the closer things get to the filing deadline, the more likely you are to have forgotten something.
Experience the Benefits of Tax Planning for Self-Employed Individuals with MKS&H
MKS&H provides tax and accounting services to businesses of every size and in every industry. We can work with you to explore the many tax benefits of investment properties and assess your real estate portfolio. Contact us today for a consultation.
About MKS&H: McLean, Koehler, Sparks & Hammond (MKS&H) is a professional service firm with offices in Hunt Valley and Frederick. MKS&H helps owners and organizational leaders become more successful by putting complex financial data into truly meaningful context. But deeper than dollars and data, our focus is on developing an understanding of you, your culture and your business goals. This approach enables our clients to achieve their greatest potential.